Sunday, April 26, 2020

March durable goods, new and existing home sales

Widely watched releases of the past week included the March advance report on durable goods and the March report on new home sales, both from the Census bureau, and the Existing Home Sales Report for March from the National Association of Realtors (NAR)….also released this week was the Chicago Fed National Activity Index (CFNAI) for March, a weighted composite index of 85 different economic metrics, which fell to –4.19 in March from +0.06 in February, after February's index was revised down from the +0.16 reported last month...as a result, the 3 month average of that index fell to –1.47 in March from a revised –0.20 in February, wherein negative readings indicate that national economic activity has been below the historical trend over recent months...

This week also saw the release of another regional Fed manufacturing survey for April: the Kansas City Fed manufacturing survey for April, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index fell to -30 in April, the lowest reading in the survey’s history, down from -17 in March and down from a index reading of +5 in February, indicating a severe contraction of that region's manufacturing....

March Durable Goods: New Orders Down 14.4%, Shipments Down 4.4%, Inventories Up 0.6%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for March (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods decreased by $36.0 billion or 14.4 percent to $213.2 billion in March, after February's new orders were revised from the $249.4 billion reported last month to $249.2 billion, now an increase of 1.1% from January's new orders, revised from the 1.2% increase originally reported...but after that big March drop, year to date new orders are now down by 5.2% from those of 2019...the volatile monthly new orders for transportation equipment led this month’s decrease, as new transportation equipment orders fell $35.6 billion or 41.0 percent to $51.2 billion, on a 295.7% drop in new orders for commercial aircraft, due to net cancellations valued at $16,345 million....excluding orders for transportation equipment, other new orders were down 0.2%, while excluding just new orders for defense equipment, new orders fell 15.8%....at the same time, new orders for nondefense capital goods less aircraft, a category that’s a proxy for equipment investment, rose 0.1% to $68,903 million, led by a 3.7% increase in new orders for communications equipment...

Meanwhile, the seasonally adjusted value of March shipments of durable goods, which will ultimately be included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, decreased by $11.4 billion or 4.5 percent to $240.7 billion, after the value of February shipments was revised from $252.3 billion to $252.14 billion, still up 0.8% from January in the only shipments increase in 9 months....lower shipments of transportation equipment were responsible for most of the March decrease, as those shipments fell $10.9 billion or 12.8 percent to $74.1 billion on an 18.5% decrease in shipments of motor vehicles...

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $2.7 billion or 0.6 percent to $437.4 billion, after the value of end of February inventories was revised from $434.9 billion to $434.7 billion, still an increase which is considered statistically unchanged from January....a $0.9 billion or 0.6 percent increase to $152.6 billion in the value of inventories of transportation equipment led the March increase, on a 1.5% increase in the value of inventories of commercial aircraft...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but somewhat volatile new orders, fell for the 1st time in the past 4 months, decreasing by $23.4 billion or 2.0 percent to $1,135.2 billion, after the February unfilled orders increase was revised from $1.4 billion to $1.3 billion, still up 0.1% from January...a $22.9 billion or 2.9 percent decrease to $768.3 billion in unfilled orders for transportation equipment accounted for most of the decrease, while unfilled orders excluding transportation equipment orders were down 0.1% to $366,848 million....the unfilled order book for durable goods is now 3.6% below the level of last March, with unfilled orders for transportation equipment now 5.0% below their year ago level, mostly on a 9.1% decrease in the backlog of orders for commercial aircraft...

New Home Sales Reported 15.4% Lower in March after Prior Months Revised Lower

The Census report on New Residential Sales for March (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 627,000 homes annually during the month, which was 15.4 percent (±14.8 percent) below the revised February annual sales rate of 741,000, and 9.5 percent (±14.6 percent)* below the estimated annual rate that new homes were selling at in March of last year....the asterisk indicates that based on their small sampling, Census could not tell whether March new home sales rose or fell from home sales of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report, sales of new single family homes in February were revised from the annual rate of 765,000 reported last month to an annual rate of 741,000, and new home sales in January, initially reported at an annual rate of 764,000 and revised to a 800,000 annual rate last month, were revised back to a 777,000 a year rate with this report, while December's annualized new home sales rate, initially reported at an annual rate of 694,000 and revised from the initial revision of 708,000 to a 724,000 a year rate last month, were revised to a 723,000 rate with this release...

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 61,000 new single family homes sold in March, down from the estimated 66,000 new homes that sold in February but up from the 59,000 that sold in January...the raw numbers from Census field agents were further used to estimate that the median sales price of new houses sold in March was $321,400, down from the median sale price of $330,100 in February but up from the median sales price of $310,600 in March a year ago, while the average new home sales price was $375,300, down from the $387,200 average sales price in February, but up from the average sales price of $372,700 in March a year ago....a seasonally adjusted estimate of 333,000 new single family houses remained for sale at the end of March, which represents a 6.4 month supply at the March sales rate, up from the 5.0 months of new home supply originally reported in February...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales Decrease to 627,000 Annual Rate in March and A few Comments on March New Home Sales..

Existing Home Sales Decrease 8.5% in March

The National Association of Realtors (NAR) reported that existing home sales fell at a 8.5% rate from February to March on a seasonally adjusted basis, projecting that 5.27 million existing homes would sell over an entire year if the March home sales pace were extrapolated over that year, a pace that was still 0.8% above the annual sales rate projected in March of a year ago...February homes sales, now reported at a 5.76 million annual rate, were revised from the 5.77 annual rate reported a month ago....the NAR also reported that the median sales price for all existing-home types was $280,600 in March, which was 8.0% higher than the median price of $259,700 in March a year earlier, which they report "marks 97 straight months of year-over-year gains".....the NAR press release, which is titled "Home Sales Increase Year-Over-Year Despite Expected Monthly March Sales Decline Due to Impact of COVID-19", is in easy to read plain English, so if you're interested in a regional breakdown, or the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually happened during the month...this unadjusted data estimates that roughly 415,000 homes sold in March, up 23.9% from the 335,000 homes that sold in February, and up by 3.8% from the 400,000 homes that sold in March of last year, so we can see that it was the effect of a large springtime seasonal adjustment that caused the headline to show a decrease....that same pdf indicates that the median home selling price for all housing types rose by 3.8%, from a revised $270,400 in February to $280,600 in March, while the average home sales price rose 3.3% to $316,000 from the $305,800 average sales price in February, and was up 6.2% from the $297,500 average home sales price of March a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, again see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Decreased to 5.27 million in March and Comments on March Existing Home Sales...

 

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

Monday, April 20, 2020

March retail sales, industrial production, & new home construction; February's business inventories

Major monthly reports released this past week included the Retail Sales report for March and the Business Sales and Inventories report for February from the Census Bureau, the March report on Industrial Production and Capacity Utilization from the Fed, and the March report on New Residential Construction from the Census Bureau…the week also had the release of the March Import-Export Price Index and the Regional and State Employment and Unemployment Summary for March, both from the Bureau of Labor Statistics....

This week also saw first two regional Fed manufacturing surveys for April: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, an NYC suburban county in Connecticut, northern New Jersey, and Puerto Rico, reported their headline general business conditions index fell to -78.2, "the lowest level in the history of the survey - by a wide margin", down from +3.7 in March, suggesting a deep depression in First District manufacturing... meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell to -56.6 in April from -12.7 in March, the index’s lowest reading since July 1980, indicating that the great majority of the region's manufacturing firms reported decreases in their activity this month...

Retail Sales Fell 8.7% in March, Largest Drop on Record

Seasonally adjusted retail sales decreased by 8.7% in March, the largest drop on record, after retail sales for January and February were both revised a bit higher...the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $483.1 billion during the month, which was down by 8.7 percent (±0.4%) from February's revised sales of $529.3 billion and 6.2 percent (±0.7 percent) below the adjusted sales in March of last year...February's seasonally adjusted sales were revised from $528.1 billion to $529.3 billion, while January's sales were revised from $530.9 billion to $531.643 billion; as a result, the percent change from January to February was revised from down 0.5 percent (±0.4 percent) to down 0.4 percent (±0.2 percent)....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were actually up 0.2%, from $481,035 million in February to $481,912 million in March, while they were down 7.0% from the $518,304 million of sales in March of a year ago...

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the March Census Marts pdf...to again explain what this table shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month's March "advance" report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called "preliminary") as of this report, with the new January to February percentage change under "Jan 2020 r" (revised) and the February 2019 to February 2020 percentage change as revised in the 2nd column of that pair...(for your reference, our copy of this same table from the advance February estimate, before this month's revisions, is here).... lastly, the third pair of columns shows the percentage change of the first 3 months of this year's sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of the 1st quarter a year ago....as you can see from that fifth column, overall retail sales for the 1st quarter of 2020 were roughly 2.4% lower than the 4th quarter of 2019, which implies that nominal personal consumption of goods for the 1st quarter will be down by roughly the same amount, before any inflation adjustments…

March 2020 retail sales table

In addition to overall sales indicating the largest drop on record, many of the other subsets by type of sales were also record breaking...sales at furniture stores, sales at clothing stores, sales at department stores, sales at auto dealers, sales at sporting goods stores, and sales at bars and restaurants were all down by the most on record; on the other hand, sales at grocery stores and sales at drug stores were up by the most they've ever been...for most of the metrics you see above, a change in sales greater than 2% is very unusual; this month each of those metrics except for building supplies saw month over month change in sales greater than 3%...

To compute March's real personal consumption of goods data for national accounts from this March retail sales report, the BEA will use the corresponding price changes from the March consumer price index, which we reviewed when it was released last week...to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals...from the third line on the above table, we can see that March retail sales excluding the 17.2% price-related decrease in sales at gas stations were down by 8.0%....then, removing the 25.6% increase in grocery & beverage sales and the 26.5% decrease in food services sales out from that total, we find that core retail sales were down by around 10.7% for the month...since the March CPI report showed that the the composite price index of all goods less food and energy goods was 0.3% lower in March, we can thus figure that real retail sales excluding food and energy will show a decrease of around 10.4%...however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were down 26.5%, the March price index for transportation commodities other than fuel was 0.1% higher, which would mean that real unit sales at auto & parts dealers were probably on the order of 26.4% lower, once the price increase is taken into account... on the other hand, while nominal sales at clothing stores were 50.2% lower in March, the apparel price index was 2.0% lower, which means that real sales of clothing likely fell around 48.2%...

In addition to figuring those core retail sales, we should adjust food and energy retail sales for their price changes separately, just as the BEA will do…the March CPI report showed that the food price index was 0.3% higher, as the price index for food purchased for use at home rose 0.5% while the index for food bought away from home was 0.2% higher...hence while nominal sales at food and beverage stores were 25.6% higher, real sales of food and beverages would be around 25.1% higher in light of the 0.5% higher prices…on the other hand, the 26.5% decrease in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants fell around 26.7% during the month...and while sales at gas stations were down 17.2%, there was a 10.2% decrease in price of gasoline during the month, which would suggest that real sales of gasoline were down on the order of 2.9%, with a caveat that gasoline stations do sell more than gasoline, so the actual decrease in real gas station sales was likely smaller...averaging real sales that we have thus estimated back together, and excluding food services, we'll then estimate that the income and outlays report for March will show that real personal consumption of goods fell by more than 6.5% in March, after being unchanged in February (revised) and rising by a revised 0.2% in January...at the same time, the 26.7% decrease in real sales at bars and restaurants would reduce March real personal consumption of services by nearly 3%...

Industrial Production Down 5.4% in March, Worst Drop Since January 1946

The Fed's G17 release on Industrial production and Capacity Utilization for March reported that industrial production fell 5.4% in March, the largest drop since January 1946,  after rising by a revised 0.5% in February, which left production 5.5% lower than a year ago... the industrial production index, with the benchmark set for average 2012 production to be equal to 100.0, ended at 103.7 in March, down from an unrevised February index index reading of 109.6, after the January index was revised up from 109.0 to 109.1, which caused the February increase to be revised from 0.6% down to 0.5%...meanwhile December index was unrevised at 109.6, while the November index was revised from 110.0 to 110.1...as a result of those revisions and the March drop, US industrial production was down at a 7.5% annual rate for the first quarter as a whole...

The manufacturing index, which accounts for around 77% of the total IP index, fell 6.3% from an unrevised 104.9 in February to 98.3 in March, the largest decline since February 1946, after the the January manufacturing index was revised from 104.8 to 104.9 and the December manufacturing index was revised from 105.0 to 105.1....after revisions, the manufacturing index now sits 6.6% below its year ago level, while first quarter manufacturing has shrunk at a 7.1% annual rate from that of the 4th quarter of 2019....meanwhile, the mining index, which includes oil and gas well drilling, fell 2.0%, from 132.7 in February to 130.1 in March, after the February mining index was revised down from last month's reported 133.0, which left the mining index unchanged from where it was a year earlier...finally, the utility index, which typically fluctuates due to deviations from normal temperatures, fell by 3.9% in March, from 105.5 to 101.3, after the February utility index was revised from 105.4 to 105.5, now up 7.0% from January...including this month's revisions, the utility index is now 5.1% below that of a year ago, partly due to a warmer March this year than last..

This report also includes capacity utilization data, which is expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry fell to 72.7% in March from 77.0% in February, which was unrevised from a month ago...capacity utilization of NAICS durable goods production facilities fell from an unrevised 74.7% in February to 67.8% in March, while capacity utilization for non-durables producers was down from 76.4% to 73.9%...capacity utilization for the mining sector fell to 86.3% in March from 88.2% in February, which had been reported as 88.4% last month, while utilities were operating at 72.7% of capacity during March, down from 75.9% in February, while the February utility index was revised from the previously reported 75.8%...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.. 

March Housing Starts and Building Permits Significantly Lower than February's

The March 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 1,216,000 in March, which was 22.3 percent (±12.2 percent) below the revised estimated annual rate of 1,564,000 starts in February, but was 1.4 percent (±12.7 percent)* above last March's rate of 1,199,000 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 year, with the figures in parenthesis the most likely range of the change indicated; in other words, March housing starts could have been down by 11.3% or up by as much as 14.1% from those of last March, with revisions of a greater magnitude in either direction still possible...in this report, the annual rate for February housing starts was revised from the 1,599,000 reported last month to 1,564,000, while January starts, which were first reported at a 1,567,000 annual rate, were revised from last month's initial revised figure of 1,624,000 annually to a 1,619,000 annual rate with this report....

These annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 100,100 housing units were started in March, down from the 111,300 units that were started in February and the 113,1000 units that were started in January...of those housing units started in March, an estimated 71,100 were single family homes and 27,300 were units in structures with more than 5 units, down from the revised 72,900 single family starts in February and down from the 37,200 units started in structures with more than 5 units in February...

The monthly data on new building permits, with a smaller margin of error, are usually a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in March, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,353,000, which was 6.8 percent (±1.1 percent) below the revised February rate of 1,452,000 permits, but was 5.0 percent (±2.4 percent) above rate of building permit issuance in March a year earlier...the annual rate for housing permits issued in February was revised down from the originally reported  1,464,000....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 roughly 116,000 housing units were issued in March, up from the revised estimate of 100,200 new permits issued in February, with permits for both single family and apartment units 7,500 higher than the previous month.... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk:Housing Starts decreased to 1.216 Million Annual Rate in March and Comments on March Housing Starts...

February Business Sales Down 0.5%, Business Inventories Down 0.4%

After the release of the March retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for February (pdf), which incorporates the revised February retail data from that March retail report and the earlier published February wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....note that wholesale sales and inventories were revised on March 24th, which thus revised the figures that were reported a month ago, even before the usual revisions to the prior month’s data that accompany this report...

According to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,464.2 billion in February, down 0.5 percent (±0.2 percent) from January's revised sales, but up 1.4 percent (±0.3 percent) from February sales of a year earlier...Januarys sales were concurrently revised from the originally reported $1,471.2 billion to $1,471,332 million, now a 0.5% increase from December....the value of manufacturer's sales fell 0.2% to $500,349 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, fell 0.5% to $463,196 million, while wholesale sales fell 0.8% to $500,660 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,012.7 billion at the end of February, down 0.4 percent (±0.1%) from the end of January, and 0.1  percent (±0.4 percent) lower than in February a year earlier...at the same time, the value of end of January inventories was revised from the $2,035.3 billion reported last month to $2,021.5 billion, now 0.3% lower than December....seasonally adjusted inventories of manufacturers were estimated to be valued at $702,008 million, down 0.3% from January, and inventories of retailers were valued at $659,246 million, 0.1% less than in January, while inventories of wholesalers were estimated to be valued at $660,230 million at the end of February, 0.6% lower than in January...

For GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for February, which was down by 0.9% for finished goods...two weeks ago, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those real inventories still fell short of the large increase in 4th quarter real factory inventories…however, since all retail inventories and most of wholesale inventories are finished goods, they will show modest increases in February once adjusted with the producer price index...since the 4th fourth quarter saw both real retail inventories and real wholesale inventories turn negative, any first quarter real increases in those inventories will add to 1st quarter GDP by the sum of the 4th quarter decrease plus the first quarter increase...

Sunday, April 12, 2020

March Consumer and Producer Prices; February’s Wholesale Trade and Job Openings Survey

Regular monthly reports released this week included the March Consumer Price Index, the March Producer Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) for February, all from the Bureau of Labor Statistics, while the Census Bureau released the February report on Wholesale Trade, Sales and Inventories....in addition, the Fed released the Consumer Credit Report for February, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $22.3 billion, or at a 6.4% annual rate, as non-revolving credit expanded at a 7.0% annual rate to $3,129.4 billion and revolving credit outstanding grew at a 4.8% rate to $1,096.1 billion...

Also noteworthy was this week's Weekly Claims for Unemployment from the Labor Department, which indicated that another 6.6 million of us have filed for unemployment for the first time, bringing the 3 week total to 16.6 million, or about 11% of the labor force...moreover, continuing claims were at a new record high of 7,455,000, already topping their 6,635,000 peak at the depth of the 2008-2009 Great Recession...

Consumer Prices Fell 0.4% in March on Lower Prices for Gasoline, Clothing, & Airfares

The consumer price index fell 0.4% in March, the biggest drop since January 2015, as lower prices for energy, clothing, lodging, transportation services and new vehicles were only partly offset by higher prices for food, rent, and medical services...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices fell by 0.4% in March, after rising by 0.1% in February, by 0.1% in January, by 0.2% in December, 0.2% in November, 0.2% in October, 0.1% in September, 0.1% in August and rising by 0.3% last July...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, fell from 258.678 in February to 258.115 in March, which left it statistically 1.5393% higher than the 254.202 index reading of March of last year, which is reported as a 1.5% year over year increase, down from a 2.3% year over year increase a month ago....with lower prices for energy a major drag on the overall index increase, seasonally adjusted core prices, which exclude food and energy, fell by 0.1% for the month, even as the unadjusted core price index rose from 267.268 to 267.312, which left the core index 2.0914% ahead of its year ago reading of 261.836, which is reported as a 2.1% year over year increase, down from the 2.4% year over year increase that was reported for February...

The volatile seasonally adjusted energy price index fell 5.8% in March, after falling 2.0% in February and 0.7% in January, but after rising 1.6% in December, 0.8% in November and by 1.7% in October, but after falling 0.8% in September, falling 1.4% in August and rising 0.9% in July, and is now 5.7% lower than in March a year ago...the price index for energy commodities was 10.4% lower in March, while the index for energy services was 0.5% lower, after falling 0.3% in February....the energy commodity index was down 10.4% due to a 10.5% decrease in the price of gasoline, the largest component, and a 13.7% decrease in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.7% lower...within energy services, the price index for utility gas service fell 1.4% after falling 0.9% in February and is now 2.9% lower than it was a year ago, while the electricity price index fell 0.2% after falling 0.1% in February....energy commodities are now averaging 10.4% lower than their year ago levels, with gasoline prices averaging 10.2% lower than they were a year ago, while the energy services price index is now down 0.5% from last March, as electricity prices are still 0.2% higher than a year ago…

The seasonally adjusted food price index rose 0.3% in March, after rising 0.4% February, 0.2% January, 0.2% December, 0.1% in November, 0.2% October, 0.2% September, but being unchanged last June, July & August, as the price index for food purchased for use at home was 0.5% higher in March, while the index for food bought to eat away from home was 0.2% higher, as average prices at fast food outlets were unchanged while prices at full service restaurants rose 0.4% and food prices at employee sites and schools were also on average 0.4% higher...

In the food at home categories, the price index for cereals and bakery products was 0.1% higher as average bread prices rose 0.3%, prices for breakfast cereals rose 1.8%, and the price index for cakes, cupcakes, and cookies also rose 1.8%, while the price index for sweetrolls, coffeecakes, & doughnuts fell 2.3%...at the same time, the price index for the meats, poultry, fish, and eggs group was also 0.1% higher, as ham prices rose 1.2%, egg prices rose 2.8%, and the poultry index was 1.3% higher... meanwhile, the seasonally adjusted index for dairy products was 0.6% higher, as prices for ice cream & related products rose 2.2% and the index for 'other' dairy products rose 1.4%...in addition, the fruits and vegetables index was 0.8% higher as the price index for fresh fruits rose 1.0%, the price index for fresh vegetables rose 0.3, and the price index for canned fruits and vegetables rose 1.1%...at the same time, the beverages index was 0.8% higher as the price index for carbonated drinks rose 1.3% and the price index for beverage materials including coffee and tea rose 1.1%....lastly, the index for the ‘other foods at home’ category was up 0.6%, as the price index for sugar and sugar substitutes rose 1.7%, butter and margarine prices rose 3.1%, and the price index for salt and other seasonings and spices rose 2.2%...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 March, just the price index for oranges and tangerines, which has risen 10.8%,  is the only food item with a price change greater than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which fell by 0.1% in March after rising by 0.2% in February, 0.2% in January, 0.1% December, 0.2% November, 0.1% October, 0.2% in September, 0.2% in August, and by 0.3% in July, the composite price index of all goods less food and energy goods was 0.3% lower in March, while the more heavily weighted composite for all services less energy services was unchanged....among the goods components, which will be used by the Bureau of Economic Analysis to adjust March’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.3% lower, as the price index for window and floor coverings fell 0.7% and the index for bedroom furniture fell 2.0%....in addition, the apparel price index was 2.0% lower on a 5.7% decrease in the price index for women's dresses, a 2.4% decrease in the price index for girl's apparel, a 2.8% decrease in the price index for footwear, and a 4.3% increase in the price index for infants' and toddlers' apparel...on the other hand, the price index for transportation commodities other than fuel was 0.1% higher even though prices for new cars fell 0.5% as prices for used cars and trucks rose 0.8% and the price index for vehicle parts and equipment other than tires rose 0.1%....meanwhile, prices for medical care commodities were unchanged as prescription drugs prices fell 0.2%, non-prescription drugs prices rose 0.8% and the medical equipment price index fell 0.2%...at the same time, the recreational commodities index was 0.8% lower on a 1.0% decrease in the price index for pets, pet supplies, and accessories, a 2.0% decrease in the price index for sporting goods,  and a 7.1% decrease in the price index for sewing machines, fabric and supplies...on the other hand, the education and communication commodities index was 0.4% higher on a 0.8% increase in the price index for computers, peripherals, and smart home assistants...lastly, a separate price index for alcoholic beverages was 0.5% higher, while the price index for ‘other goods’ was 0.3% higher on a 2.4% increase in the index for infants' equipment and a 1.0% increase in cigarette prices..

Within core services, the price index for shelter was unchanged even though rents rose 0.3% and homeowner's equivalent rent rose 0.3% because prices for lodging away from home at hotels and motels fell 7.7%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.3%, and other household operation costs were 0.1% higher....in addition, the price index for medical care services was 0.5% higher, as the price index for hospital inpatient services rose 0.6%, the price index for care of invalids and elderly at home rose 1.7% and the price of health insurance rose 1.3%... on the other hand, the transportation services price index was 1.6% lower as the price index for car and truck rental fell 6.9%, airline fares fell 12.6% and other intercity transportation costs fell 4.0%....at the same time, the recreation services price index rose 0.6% as the index for rental of video discs and other media rose 0.8% and the index for admission to sporting events rose 2.2%...meanwhile, the index for education and communication services was 0.1% higher as elementary and high school tuition and fees rose 0.4%, and postage rose 0.2%....lastly, the index  for other personal services was up 0.2% as the price index for apparel services other than laundry and dry cleaning rose 1.6%, and the index for checking account and other bank services was 1.2% higher...

Among core line items, prices for televisions, which are now averaging 16.8% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 13.5% since last March, the rental of video discs and other media, which has fallen 16.0% from a year ago, the price index for sewing machines, fabric and supplies, which is down 11.2% year over year, the price index for women's dresses, which has fallen by 10.0% in the past year, airline fares, which are now down by 10.6% since last March and the price index for computer software and accessories, which is down 10.9% year over year, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is now up by 20.6% over the past year, and the price index for Infants' equipment, which has risen 11.6%, are the only line items to have increased by a double digit magnitude over that span....

Producer Prices Down 0.2% in March on Lower Energy Prices, Lower Margins for airline passenger services

The seasonally adjusted Producer Price Index (PPI) for final demand fell 0.2% in March, as prices for finished wholesale goods averaged 1.0% lower, while average margins of final services providers increased by 0.2%...that follows a February report that showed the PPI had fallen 0.6%, with prices for finished wholesale goods averaging 0.9% lower, while average margins of final services providers fell by 0.3%, a January report that indicated the PPI had risen 0.5%, as prices for finished wholesale goods had been on average 0.1% higher, while margins of final services providers increased by 0.7%, a revised December report that indicated the PPI was up 0.2%, with prices for finished wholesale goods up 0.3% while margins of final services providers were 0.1% higher, and a revised November report that shows the PPI was 0.1% lower, with prices for finished wholesale goods rising 0.3% while margins of final services providers fell 0.3%....on an unadjusted basis, producer prices are now now just 0.7% higher than a year ago, down from the 1.3% year over year increase indicated by last month's report, while, the core producer price index, which excludes food, energy and trade services, fell by 0.2% for the month, and is now 1.0% higher than in March a year ago, down from the 1.4% year over year increase shown in February...

As noted, the price index for final demand for goods, aka 'finished goods', was 1.0% lower in March, after being 0.9% lower in February, 0.1% higher in January, 0.3% higher in December, 0.3% higher in November, 0.5% higher in October, 0.2% lower in September, 0.3% lower in August, 0.3% higher in July, 0.5% lower in June, 0.2% lower in May, 0.3% higher in April, and 0.9% higher in March of last year....the finished goods index fell 1.0% in March because the price index for wholesale energy goods was 6.7% lower, after falling by 3.6% in February and 0.7% in January but after rising by 1.5% in December, 0.5% in November and 1.8% in October, while the price index for wholesale foods was unchanged after falling 1.6% in February, rising 0.2% in January, falling 0.3% in December and after rising 1.2% in November, and while the index for final demand for core wholesale goods (excluding food and energy) was 0.2% higher after falling 0.1% in February but rising 0.3% in January and 0.2% in December...wholesale energy prices were lower due to a 16.8% decrease in wholesale prices for gasoline, a 21.1% decrease in wholesale prices for liquefied petroleum gas, and a 12.6% decrease in wholesale prices for diesel fuel, while the wholesale food price index was unchanged as a 2.5% decrease in the wholesale price index for fresh fruits and melons, a 3.0% decrease in the wholesale price index for pork and a 3.1% decrease in the wholesale price index for oilseeds were offset by a 26.4% increase in the wholesale price of eggs for fresh use....among wholesale core goods, wholesale prices for mobile homes rose 1.5%, wholesale prices for light motor trucks rose 1.3%, and the wholesale price index for commercial furniture rose 1.1%, while the wholesale price index for industrial chemicals fell 2.2%..

At the same time, the index for final demand for services rose 0.2%in March, after falling 0.3% in February, rising 0.7% in January, rising by a revised 0.1% in December, and falling by a revised 0.3% in November, as the index for final demand for trade services rose 1.4%, the index for final demand for transportation and warehousing services fell 3.3%, and the core index for final demand for services less trade, transportation, and warehousing services was unchanged... among trade services, seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers rose 8.1%, margins for fuels and lubricants retailers rose 17.2%, and margins for food and alcohol wholesalers rose 1.8%, while margins for automobile retailers fell 3.6% ... among transportation and warehousing services, margins for airline passenger services fell 10.0%, margins for truck transportation of freight fell 1.1%, and margins for air transportation of freight fell 0.9% ...among the components of the core final demand for services index, margins for consumer loans (partial) rose 5.7%, margins for arrangement of cruises and tours rose 7.3%, margins for securities brokerage, dealing, investment advice, and related services rose 4.8%, and margins for sales and subscriptions of periodicals and newspapers rose 3.7%, while margins for deposit services (partial) fell 7.7%...

This report also showed the price index for intermediate processed goods fell 1.1% in March, after falling 0.9% in February and 0.3% in January, rising 0.1% in December, and rising 0.2% in November....the price index for intermediate energy goods fell 5.9%, as refinery prices for gasoline fell 16.8%, refinery prices for jet fuel fell 8.2% and refinery prices for No. 2 diesel fuel fell 12.6%, while producer prices liquefied petroleum gas fell 21.1%...at the same time, prices for intermediate processed foods and feeds fell 0.8%, as the producer price index for meats fell 2.2% and the index for prepared animal feeds fell 1.4%...meanwhile, the core price index for intermediate processed goods less food and energy fell 0.1% as the producer price index for secondary nonferrous metals fell 3.5%, the producer price index for copper and brass mill shapes fell 1.8% and producer prices for synthetic rubber decreased 1.5%... prices for intermediate processed goods are now 3.7% lower than in March a year ago, the eleventh consecutive year over year decrease, following 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods fell 8.0% in March, after falling 7.7% in February and 0.6% in January, but after rising a revised 1.3% in December and a revised 3.1% in November....that was as the March price index for crude energy goods fell 19.1% as crude oil prices fell 34.6% and as coal prices fell 3.1%, while the price index for unprocessed foodstuffs and feedstuffs fell 3.6% on a 10.5% decrease in producer prices for slaughter cattle, a 10.4% decrease in producer prices for slaughter chickens, and a 5.0% decrease in producer prices for alfalfa hay...at the same time, the index for core raw materials other than food and energy materials rose 1.3%, as prices for wastepaper rose 14.8%, the price index for carbon steel scrap increased 3.8%, and the price index for unprocessed iron and steel scrap rose 3.2%....this raw materials index is now 15.4% lower than a year ago, as the year over year change on this index remained negative all last year...

Lastly, the price index for services for intermediate demand fell 0.1% in March after falling 0.1% in February, being unchanged in January, rising a revised 0.6 percent in December, but after falling a revised 0.1 percent in November...the price index for intermediate trade services was 0.7% higher, as margins for intermediate metals, minerals, and ores wholesalers rose 3.0%, margins for building materials, paint, and hardware wholesalers rose 2.8% and margins for intermediate food wholesalers rose 1.3%...meanwhile, the index for transportation and warehousing services for intermediate demand was 1.3% lower, as the intermediate price index for airline passenger services fell 10.0% and the price index for arrangement of freight and cargo fell 4.6%...at the same time, the core price index for intermediate services less trade, transportation, and warehousing was 0.1% lower, as the intermediate price index for passenger car rental fell 4.4%, the intermediate price index for deposit services (partial) fell 7.7%, the price index for radio advertising time sales fell 4.5% and the index for "internet advertising space sales, excluding Internet ads sold by print publishers" fell 4.6%, while the intermediate price index for securities brokerage, dealing, investment advice, and related services rose 4.8% and the price index for business loans (partial) rose 4.0%...over the 12 months ended in March, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now just 1.0% higher than it was a year ago, down from 1.4% in February and from 1.7% in January...

February Wholesale Sales Down 0.8%, Wholesale Inventories Down 0.7% Due to Lower Prices

The February report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $500.7 billion, down 0.8 percent (±0.5 percent) from the revised January level, but 1.1 percent (±0.9 percent) higher than wholesale sales of February 2019... the December 2019 to January 2020 percent change was revised from the preliminary estimate of up 1.6 percent (±0.5 percent) to $504,570 million to an increase of 1.3 percent (±0.9 percent) to $504,733 million in conjunction with an annual revision based on the results of the 2018 Annual Wholesale Trade Survey, which makes such comparisons to previous published amounts nonsense....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 sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this February report estimated that wholesale inventories were valued at $655.8 billion at month end, a decrease of 0.7 percent (+/-0.4%) from the revised January level and also 1.3 percent (±1.1 percent) lower than February a year ago, with the January preliminary inventory estimate revised downward from the advance estimate of down 0.5 percent (±0.2 percent) to down 0.7 percent (±0.2 percent)....

For national accounts, the wholesale inventories reported here will be adjusted the February producer price index, ie the index a month prior to the one we just reported on...with notable exceptions such as inventories of farm products, chemicals and petroleum, we've previously estimated that wholesale inventories appear to be roughly 70% finished goods....with the February producer price index for finished goods down by 0.9% while the producer price indexes for intermediate goods & raw goods were 0.9% and 7.7% lower respectively, we can thus figure that February’s real wholesale inventories would have increased by at least 0.2% and probably more...since the real wholesale inventories saw a substantial decrease over the 4th quarter, any real increase in the 1st quarter will not only reverse that, but also add to the growth of GDP in accordance with the size of the real inventory increase..

Job Openings, Hiring & Quitting were Lower in February; Layoffs inched Higher

The Job Openings and Labor Turnover Survey (JOLTS) report for February from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 130,000, from 7,012,000 in January to 6,882,000 in February, after January job openings were revised up from the originally reported 6,963,000 ...February's jobs openings were also 2.4% lower than the 7,048,000 job openings reported in February a year ago, as the job opening ratio expressed as a percentage of the employed fell from 4.4% in January to 4.3% in February, which was also down from the 4.5% rate of February a year ago...since February's job openings in bars and restaurants were reported 12,000 higher, we can probably figure that most other jobs opening figures in this report are equally meaningless by now (details on job openings by industry and region can be viewed in Table 1)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked 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 February, seasonally adjusted new hires totaled 5,896,000, down by 29,000 from the revised 5,925,000 who were hired or rehired in January, as the hiring rate as a percentage of all employed remained at 3.9% in February, which was up from the 3.8% hiring rate in February a year earlier (details of hiring by sector since October are in table 2)....meanwhile, total separations fell by 143,000, from 5,703,000 in January to 5,560,000 in February, as the separations rate as a percentage of the employed fell from 3.7% in January to 3.6% in February, while it was down from 3.8% in February a year ago (see details in table 3)...subtracting the 5,560,000 total separations from the total hires of 5,896,000 would imply an increase of 336,000 jobs in February, somewhat more than the revised payroll job increase of 275,000 for February reported in the March establishment survey last week but still within the expected +/-115,000 margin of error in these incomplete samplings...

Breaking down the seasonally adjusted job separations, the BLS founds that 3,497,000 of us voluntarily quit our jobs in February, down by 77,000 from the revised 3,574,000 who quit their jobs in January, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.3% of total employment, which was down from the quits rate of 2.4% year earlier (see details in table 4)....in addition to those who quit, another 1,755,000 were either laid off, fired or otherwise discharged in February, up by 14,000 from the revised 1,741,000 who were discharged in January, as the discharges rate rose from 1.1% to 1.2% of all those who were employed during the month, while it was unchanged from the discharges rate of a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 308,000 in February, down from 388,000 in January, for an 'other separations rate’ of 0.2%, down from 0.3% in January but the same as in February of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and  on job quits and discharges can be accessed using the links to tables at the bottom of the press release...  

 

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

Sunday, April 5, 2020

March jobs report; February’s trade deficit, construction spending & factory inventories

Major monthly reports released over the past week included the Employment Situation Summary for March from the Bureau of Labor Statistics, the Commerce Dept report on our International Trade for February, and the February report on Construction Spending and the Full Report on Manufacturers' Shipments, Inventories and Orders for February, both from the Census Bureau...this week also saw the last of the regional Fed manufacturing surveys for March: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index fell to -70.0 from last month's +1.2, the largest drop on record to the lowest level on record, indicating the sudden onset of depression like conditions in the Texas region's economy..

Privately issued reports released this week included the ADP Employment Report for March and the light vehicle sales report for March from Wards Automotive, which estimated that vehicles sold at a 11.37 annual rate in March, down from the 16.83 annual sales rate in February, and down from the 17.48 million rate a year earlier...the week also had the Case-Shiller Home Price Index for January from S&P Case-Shiller, which reported that home prices during November, December and January averaged 3.9% higher nationally than prices for the same homes that sold during the same 3 month period a year earlier....in addition, the week saw both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the March Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 49.1% in March, down from 50.1% in February, which suggests a modest contraction in manufacturing firms nationally, and the March Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 52.5% in March, down from 57.3% in February, indicating a somewhat smaller plurality of service industry purchasing managers reported expansion in various facets of their business in March...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 Cut 701,000 Jobs in March, Unemployment Rate Rises 0.9% to 4.4%, Employment Rate Falls 1.1% to 60.0%

The Employment Situation Summary for March is showing the first signs of jobs losses due to the coronavirus outbreak, and the policies put in place to contain its spread…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers cut 701,000 jobs in March, after the previously estimated payroll job increase for January was revised down from 273,000 to 214,000 and the payroll jobs increase for February was revised up from 273,000 to 275,000…so including those revisions, this report thus represents a total of 764,000 fewer seasonally adjusted payroll jobs than were reported last month...the unadjusted data shows that there were actually just 251,000 fewer payroll jobs extant in March than in February, as the usual seasonal job increases in sectors such as construction, administrative and waste services, and in leisure and hospitality were normalized by the seasonal adjustments…

Note that the surveys included in this report were conducted between March 9th and March 13th, and hence do not include the layoffs due to the coronavirus that were initiated over the past three weeks...in other words, this report does not include the record new unemployment claims of 3.34 million last week and 6.65 million this week, which suggests it's conceivable that the April report could show job losses as high as 10 million...such a sudden jump in unemployment claims is unprecedented in US history; the previous all-time high for weekly unemployment claims was 695,000, set in October 1982...

Seasonally adjusted job losses in March were spread through both the goods producing and the service sectors, but were concentrated in the sectors most impacted by the travel and business restrictions imposed by the states ...seasonally adjusted employment in the leisure and hospitality sector fell by 459,000, as an adjusted 417,400 jobs were were lost in bars and restaurants and anther 28,900 were shed by the hotel & accommodation industry...somewhat surprisingly, employment in health care and social assistance fell by 61,200, with a loss of 18,600 jobs in child day care services, a loss of 17,200 jobs in dentist's offices, and a decrease of 12,000 jobs in doctor's offices...employment in the broad professional and business services decreased by 52,000 in March, with the loss of 49,500 jobs in temporary help services...the retail sector showed a seasonally adjusted 46,200 job decrease, as furniture stores cut 10,400 employees and clothing stores cut 16,300 jobs...seasonally adjusted construction employment was off by 29,000 even as unadjusted construction employment rose by 50,000, with the adjusted job losses evenly split between those employed in construction of nonresidential buildings, by specialty trade contractors, and in heavy and civil engineering construction...employment in a so-called "other services industry" was down by 24,000 in March, with 13,100 of those losses occurring in personal and laundry services....manufacturing employment was also down by 18,000, with factories producing fabricated metal products seeing a loss of 4,400 jobs... meanwhile, federal government employment saw the only major job increase in March, with the addition of 18,000 jobs, including 17,000 census takers...otherwise, employment in the other major sectors, including resource extraction, wholesale trade, transportation and warehousing, utilities, finance, information, and private education all saw smaller changes in payroll employment over the month…

The establishment survey also showed that average hourly pay for all employees rose by 11 cents an hour to $28.62 an hour in March, after it had increased by a revised 8 cents an hour in February; at the same time, the average hourly earnings of production and non-supervisory employees increased by 10 cents to $24.07 an hour...employers also reported that the average workweek for all private payroll employees decreased by 0.2 hour to 34.2 hours in March, while hours for production and non-supervisory personnel fell by 0.3 hour to 33.4 hours, as average weekly hours in the leisure and hospitality sector dropped by 1.4 hours..in addition, the manufacturing workweek fell by 0.3 hour to 40.4 hours, while average factory overtime decreased by 0.2 hours to 3.0 hours...

Meanwhile, the March household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 2,987,000 to 155,772,000, while the similarly estimated number of those qualified as unemployed rose by 1,353,000 to 7,140,000; which thus meant a rounded decrease of 1,633,000 in the total labor force...since the working age population had grown by 130,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 1,763,000 to 96,845,000....with the number of those in the labor force decreasing while the civilian noninstitutional population was increasing, the labor force participation rate fell by 0.7% to 62.7%....at the same time, the decrease in number employed as a percentage of the increase in the population was enough to lower the employment to population ratio from 61.1% to 60.0%...at the same time, the increase in the number unemployed was enough to raise the unemployment rate from 3.5% to 4.4%....meanwhile, the number who reported they were involuntarily working part time jumped by 1,447,000 to 5,765,000 in March, which was enough to raise the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.0% in February to 8.7% in March, the largest jump on record..

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

US Trade Deficit Fell 12.2% February on Lower Imports from China and Europe

Our trade deficit fell by 12.2% February, as both our exports and imports decreased, but the value of our imports fell by more than the value of our exports did....the Commerce Department report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit fell by a rounded $5.5 billion to $39.9 billion in February, from a January deficit that was revised to $45.5 billion from the $45.3 billion deficit reported a month ago...also in rounded figures, the value of our February exports fell by $0.8 billion to $207.5 billion as a $1.0 billion increase to $137.2 billion in our exports of goods was more than offset by a $1.7 billion decrease to $70.3 billion in our exports of services, while our imports fell $6.3 billion to $247.5 billion on a $5.0 billion decrease to $198.4 billion in our imports of goods, and a $1.4 billion decrease to $49.1 billion in our imports of services....export prices averaged 1.1% lower in February, which means the relative real decrease in exports for the month was less than the nominal decrease by that percentage, while import prices fell 0.5%, meaning that the contraction in real imports was less than the nominal decrease reported here by that percentage...

The increase in our February exports of goods came about as a result of higher exports of industrial supplies and of automotive products, which was partially offset by a decrease in our exports of consumer goods...referencing the Full Release and Tables for February (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $719 million to $45,796 million as a $535 million increase in our exports of fuel oil, a $531 million increase in our exports of other petroleum products, and a $316 million increase in our exports of non-monetary gold were partly offset by a $357 million decrease in our exports of natural gas liquids, and a $253 million decrease in our exports of natural gas, and that our exports of automotive vehicles, parts, and engines rose by $537 million to $13,759 million on a $335 million increase in our exports of parts and accessories of vehicles other than tires, engines and chassis...in addition, our exports of capital goods rose by $241 million to $44,624 million on a $284 million increase in our exports of civilian aircraft, and our exports of other goods not categorized by end use rose by $292 million to $5,833 million....partially offsetting the increases in those end use categories, our exports of consumer goods fell by $698 million to $15,850 million on a $357 million decrease in our exports of pharmaceuticals and a $233 decrease in our exports of gem diamonds, while our exports of foods, feeds and beverages fell by $91 million to $10,878 million as a $503 million decrease in our exports of soybeans was partly offset by a $262 million increase in our exports of corn..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and shows that lower imports of capital goods, industrial supplies, and consumer goods were responsible for the decrease in our February imports, while their impact was partly offset by greater imports of automotive vehicles, parts and engines...our imports of capital goods fell by $3,687 million to $51,719 million as a $1,404 million decrease in our imports of computers, a $640 million decrease in our imports of telecommunications equipment, a $544 million decrease in our imports of computer accessories, a $257 million decrease in our imports of civilian aircraft engines, and a $222 million decrease in our imports of industrial machines other than those separately itemized was only slightly offset by a $325 million increase in our imports of civilian aircraft....moreover, our imports of industrial supplies and materials fell by $1599 million to $40,770 million, as our imports of our imports of fuel oil fell by $560 million, our imports of bauxite and aluminum fell by $211 million, our imports of our imports of fuel oil fell by $223 million and our imports of industrial supplies other than those itemized fell by $202 million, while our imports of crude oil rose by $431 million and our imports of precious metals other than those itemized rose by $349 million…in addition, our imports of consumer goods fell by $1,125 million to $51,330 million as a $381 million decrease in our imports of toys, games, and sporting goods, a $349 million decrease in our imports of furniture, a $239 million decrease in our imports of textiles other than wool or cotton and a $202 million decrease in our imports of footwear were partially offset by a $610 million increase in our imports of cellphones, a $315 million decrease in our imports of pharmaceuticals, and a $380 million increase in our imports of gem diamonds, and our imports of foods, feeds, and beverages fell by $403 million to $12,488 million on a $256 million decrease in imports of foods other than those itemized separately...partially offsetting the decreases in those end use categories, our imports of automotive vehicles, parts and engines rose by $1,402 million to $30,509 million on a $1387 million increase in our imports of passenger cars, and our imports of other goods not categorized by end use rose by $285 million to $9,811 million…

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

The February figures show surpluses, in billions of dollars, with South and Central America ($5.9), Brazil ($1.9), Hong Kong ($1.5), United Kingdom ($1.3), OPEC ($1.2), Singapore ($0.7), and Saudi Arabia ($0.3). Deficits were recorded, in billions of dollars, with China ($19.7), European Union ($12.6), Mexico ($9.7), Japan ($5.1), Germany ($4.8), Italy ($2.3), South Korea ($1.7), India ($1.6), Canada ($1.6), Taiwan ($1.5), and France ($0.5).

  • • The deficit with China decreased $4.0 billion to $19.7 billion in February. Exports decreased $0.3 billion to $7.5 billion and imports decreased $4.2 billion to $27.2 billion. – 3 –
  • • The deficit with the European Union (excluding the United Kingdom) decreased $2.2 billion to $12.6 billion in February. Exports decreased $0.6 billion to $22.4 billion and imports decreased $2.7 billion to $35.0 billion.
  • • The deficit with South Korea increased $1.1 billion to $1.7 billion in February. Exports decreased $1.0 billion to $4.7 billion and imports increased $0.2 billion to $6.4 billion. *

To gauge the impact of January and February trade on 1st quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2012 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that the amounts are not annualized here....from that table, we can figure that 4th quarter real exports of goods averaged 148,271 million monthly in chained 2012 dollars, while inflation adjusted 1st quarter goods exports were at 146,832 million and 150,523 million for January and February respectively in that same 2012 dollar quantity index representation...averaging January’s and February’s goods exports and then computing the annualized change between that average and the average of the fourth quarter, we find that the 1st quarter's real exports of goods are running at a 1.101% annual rate above those of the 4th quarter, or at a pace that would add about 0.09 percentage points to 1st quarter GDP..... in a similar manner, we find that our 4th quarter real imports of goods averaged 226,868.3 million monthly in chained 2012 dollars, while inflation adjusted January and February imports were at 224,808 million and 219,546 million respectively, after that same 2012 chained dollars inflation adjustment...that would indicate that so far in the 1st quarter, our real imports of goods have decreased at a 8.018% annual rate from those of the 4th quarter...since increases in imports would subtract from GDP because they would represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 8.02% rate would thus conversely add about 0.99 percentage points to 1st quarter GDP....hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to add around 1.08 percentage points to 1st quarter GDP...

Note that we have not computed the impact of the usually less volatile change in services here because the Census does not provide inflation adjusted data on those, but that the $1.7 billion decrease in exports of services would only be partially offset by the $1.4 billion decrease in imports of services, which suggests that February’s trade in services would be a subtraction from 1st quarter GDP...

Construction Spending Fell 1.3% in February after January & December Figures Were Revised Higher

The Census Bureau's report on February construction spending (pdf) reported that "Construction spending during February 2020 was estimated at a seasonally adjusted annual rate of $1,366.7 billion, 1.3 percent (±0.8 percent) below the revised January estimate of $1,384.5 billion. The February figure is 6.0 percent (±1.2 percent) above the February 2019 estimate of $1,289.0 billion. During the first two months of this year, construction spending amounted to $193.5 billion, 8.2 percent (±1.2 percent) above the $178.8 billion for the same period in 2019"...the January annualized spending estimate was revised 1.1% higher, from $1,369.2 billion to $1,384.5 billion, while December's construction spending was revised from $1,345.5 billion to $1,347.333 billion annually, which together meant that the January construction spending increase was revised from +1.8% to +2.8%...the $2.2 billion upward revision to December’s annualized spending would mean we’ll see a upward revision of about 2 basis points to 4th quarter GDP when the annual revisions are released later this summer...

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

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,025.8 billion, 1.2 percent (±0.7 percent) below the revised January estimate of $1,038.5 billion. Residential construction was at a seasonally adjusted annual rate of $564.3 billion in February, 0.6 percent (±1.3 percent)* below the revised January estimate of $567.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $461.5 billion in February, 2.0 percent (±0.7 percent) below the revised January estimate of $471.0 billion.
  • Public Construction: In February, the estimated seasonally adjusted annual rate of public construction spending was $340.9 billion, 1.5 percent (±1.6 percent)* below the revised January estimate of $345.9 billion. Educational construction was at a seasonally adjusted annual rate of $79.5 billion, 1.5 percent (±2.6 percent)* below the revised January estimate of $80.7 billion. Highway construction was at a seasonally adjusted annual rate of $102.4 billion, 1.2 percent (±4.4 percent)* below the revised January estimate of $103.6 billion.

As you can tell from that summary, construction spending data would input into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of February’s construction spending reported in this release on 1st 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 to determine the actual change in construction put in place...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 the figures for all of those types of construction separately, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment and come up with an estimate...

That price index showed that aggregate construction costs were up 0.1% in February, after they had increased by 0.8% in January, and had been unchanged in December and in November...on that basis, we can estimate that February construction costs were about 0.9% more than those of December, roughly 0.9% more than those of November, and roughly 0.9% more than those of October, and of course 0.1% more than those of January...we then use those relative price change percentages to inflate the lower cost spending figures for each of the 4th quarter months vis a vis February, which is arithmetically the same as adjusting higher priced January and February construction spending downward, for purposes of comparison....this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,347,333 in December, $1,342,490 in November, and $1,320,788 in October, while annualized construction spending was at $1,366,697 in February and $1,384,486 in January....thus to compare January's nominal construction spending of $1,384,486 and February's figure of $1,366,697 to inflation adjusted figures of the fourth quarter, our formula becomes: ((1,366,697 + 1,384,486 * 1.001) / 2 ) / (( 1,347,333 * 1.009 + 1,342,490 * 1.009 + 1,320,788 * 1.009)/ 3) = 1.020299, which tells us that real construction spending over January and February was up by 2.030% from that of the 4th quarter period, or up at a 8.37% annual rate...then, to figure the potential effect of that change on GDP,  we take the difference between the 4th quarter inflation adjusted average and that of January's & February's adjusted spending as a fraction of 4th quarter GDP, and find that 1st quarter construction spending is rising at a rate that would add about 0.70 percentage points to 1st quarter GDP, an estimate which assumes there would be little change in real construction in March over the January & February average..

February Factory Shipments Down 0.2%, Factory Inventories 0.4% Lower

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for February from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods decreased by $0.1 billion $497.4 billion in February, a change that's considered statistically insignificant...that follows a revised 0.5% decrease to $497.5 billion in January, which was originally reported at $497.9 billion a month ago, also down 0.5%....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as revised updates to the February advance report on durable goods which was released 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 February, down three of the last four months, decreased $0.1 billion or virtually unchanged to $497.4 billion, the U.S. Census Bureau reported today. This followed a 0.5 percent January decrease. Shipments, down two consecutive months, decreased $0.8 billion or 0.2 percent to $500.3 billion. This followed a 0.6 percent January decrease. Unfilled orders, up four of the last five months, increased $1.4 billion or 0.1 percent to $1,158.6 billion. This followed a virtually unchanged January increase. The unfilled orders-to-shipments ratio was 6.61, down from 6.62 in January. Inventories, down two consecutive months, decreased $2.6 billion or 0.4 percent to $699.4 billion. This followed a 0.3 percent January decrease. The inventories-to-shipments ratio was 1.40, unchanged from January.
  • New orders for manufactured durable goods in February, up four of the last five months, increased $3.0 billion or 1.2 percent to $249.5 billion, unchanged from the previously published increase. This followed a 0.1 percent January increase. Transportation equipment, up two of the last three months, drove the increase, $3.9 billion or 4.6 percent to $86.9 billion. New orders for manufactured nondurable goods decreased $3.0 billion or 1.2 percent to $247.9 billion.
  • Shipments of manufactured durable goods in February, up following seven consecutive monthly decreases, increased $2.2 billion or 0.9 percent to $252.4 billion, up from the previously published 0.8 percent increase. This followed a virtually unchanged January decrease. Transportation equipment, also up following seven consecutive monthly decreases, drove the increase, $2.4 billion or 2.9 percent to $84.9 billion. Shipments of manufactured nondurable goods, down two consecutive months, decreased $3.0 billion or 1.2 percent to $247.9 billion. This followed a 1.1 percent January decrease. Petroleum and coal products, also down two consecutive months, led the decrease, $2.1 billion or 3.9 percent to $51.1 billion.
  • Unfilled orders for manufactured durable goods in February, up four of the last five months, increased $1.4 billion or 0.1 percent to $1,158.6 billion, unchanged from the previously published increase. This followed a virtually unchanged January increase. Transportation equipment, up seven of the last eight months, drove the increase, $1.9 billion or 0.2 percent to $791.2 billion. 
  • Inventories of manufactured durable goods in February, down two consecutive months, decreased $0.1 billion or virtually unchanged to $434.5 billion, down from the previously published increase. This followed a 0.2 percent January decrease. Computers and electronic products, also down two consecutive months, drove the decrease, $0.3 billion or 0.8 percent to $43.3 billion. Inventories of manufactured nondurable goods, down two consecutive months, decreased $2.5 billion or 0.9 percent to $264.9 billion. This followed a 0.5 percent January decrease. Petroleum and coal products, also down two consecutive months, led the decrease, $2.1 billion or 5.2 percent to $38.3 billion..

To gauge the effect of February's dollar valued factory inventories on 1st 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 decreased 0.5% to $242,639 million; the value of work in process inventories was 0.6% lower at $219,634 million, and the value of materials and supplies inventories was virtually unchanged at $237,132 million...at the same time, the producer price index for February indicated that prices for finished goods decreased 0.9%, that prices for intermediate processed goods were also 0.9% lower, and that prices for unprocessed goods were on average 7.7% lower, with even core raw materials priced 1.5% lower than January's....assuming similar valuations for like inventories, that would suggest that February's real finished goods inventories were around 0.4% more than January’s, that real inventories of intermediate processed goods were 0.3% greater, and that real raw material inventory inventories were at least 1.5% greater, and probably much higher…. while the 4th quarter quarter GDP inventory increase was relatively small, resulting in almost a full point hit to GDP, that was as a large increase in real factory inventories was offset by decreases in real retail and wholesale inventories....hence, taken alone, this modest increase in February real factory inventories, following the relatively small January increase in real factory inventories, might not be enough to have a positive impact on 1st quarter GDP...

 

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