Sunday, June 7, 2020

May's job report; April’s trade deficit, construction spending, and factory inventories, et al

The most crucial economic report released this past week was the Employment Situation Summary for May from the Bureau of Labor Statistics; other major monthly government agency issued reports released during the week included the Commerce Dept’s report on our International Trade in Goods and Services for April, and the April report on Construction Spending (pdf) and the Full Report on Manufacturers' Shipments, Inventories and Orders for April, both from the Census Bureau...in addition, this week also saw the Consumer Credit Report for April from the Fed, which showed that overall consumer credit, a measure of non-real estate personal debt, contracted by a seasonally adjusted $110.5 billion, or at a record 19.6% annual rate, as non-revolving credit contracted at a 4.0% rate to $3,113.5 billion while revolving credit outstanding shrunk at a record 64.9% rate to $1,019.8 billion...

Privately issued reports released this week included the ADP Employment Report for May and the light vehicle sales report for May from Wards Automotive, which estimated that vehicles sold at a 12.21 million annual rate in May, up from the 8.58 million annual rate of sales in April, but down from the 17.31 million annual rate in May a year ago....in addition, this week saw the release of both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the May Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 43.1% in May, up from 41.5% in April, which suggests a slower contraction of manufacturing activity nationally, and the May Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 45.5%, up from a record low of 41.8% in April, indicating a somewhat smaller plurality of service industry purchasing managers reported contraction in various facets of their business in April...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 2,509,000 Jobs in May; Unemployment Rate Falls to 13.3%

The Employment Situation Summary for May indicated a rebound in payroll jobs and a decrease in the unemployment rate against consensus expectations for deeper job losses…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added a record 2,509,000 jobs in May, after the previously estimated payroll job decrease for March was revised from a loss of 881,000 jobs to one of 1,373,000, while the payroll jobs decrease for April was revised from a loss of 20,500,000 jobs to a loss of 20,687,000 jobs…with those revisions, that means that this report still indicates an increase of 1,867,000 more jobs than were reported last month...the unadjusted data shows that there were actually 2,931,000 more payroll jobs extant in May than in April, as typical seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were reduced to what the BLS considers a normal level by the seasonal adjustments…

Before this report was released, the consensus estimate was that we'd see an additional loss of 8,250,000 jobs in May, so this report left many prognosticators with egg on their faces...some have speculated that the removal of the coronavirus restrictions may have accounted for the surprise employment increase, but this survey was conducted between May 10th and May 16th, when most states were still enforcing widespread lockdowns...more likely is that many companies brought employees back on their payrolls to qualify for loan forgiveness under the Payroll Protection Plan passed earlier by congress, which had the banks dole out thousands of govt guaranteed loans to companies to tide them over through the coronavirus lockdown, with the provision that the loans would be forgiven if their employees were kept on the payroll...the establishment survey counts workers who are paid by their employer for all or any part of the pay period including the 12th of the month as employed, even if they were not actually at their jobs....hence, this reported increase in payroll jobs does not necesssarily mean that more of us were working...whatever the case, weekly unemployment claims and other reports suggested further job losses in May consistent with the estimates, so we'll probably see quite a bit of Monday morning quarterbacking next week as the analysts try to sort it all out...

Seasonally adjusted job increases in May were mostly concentrated in the sectors that saw the big job losses in March and April, with only employment in various branches of government seeing a substantial loss of another 585,000 jobs, 309,900 of which were in local school districts....with a net increase of 1,239,000 jobs, the leisure and hospitality sector accounted for more than half of the May job gain, with an increase of 1,370,600 employees working in bars and restaurants partly offset by a loss of 148,000 jobs in accommodation....seasonally adjusted construction employment rose by 464,000 in May, with 164,900 of those construction jobs added by nonresidential specialty trade contractors and another 160,400 added by residential specialty trade contractors.…employment in health care and social assistance rose by 390,700, with the return of 244,800 jobs in dentist's offices, and 71,200 jobs in offices of health practitioners other than dentists or doctors...the retail sector added 367,800 jobs, led by 84,700 returning jobs with auto dealers and 84,000 more jobs with general merchandise retailers...272,000 jobs gains were seen by "other services", with 182,300 employed by personal and laundry services….manufacturing employment rose by 225,000, led by 29,800 jobs in the production of plastics and rubber products, 27,700 jobs in the manufacture of motor vehicles and parts, and 24,900 jobs in food manufacturing....the broad professional and business services sector added back 127,000 jobs, as 68,400 found employment with  in services to buildings and dwellings and 39,100 jobs were added by temporary help employment services...in addition, job increases of 33,400 were seen in private education, 33,000 in financial activities, and 24,100 in wholesale trade, while sectors losing jobs included 38,000 in information, 20,000 in resource extraction, 19,000 in transportation and warehousing, and 2,300 with utilities....

Reflecting the return of lower paid workers, the establishment survey also showed that average hourly pay for all employees fell by 29 cents an hour to $29.75 an hour in May, after it had increased by $1.35 cents an hour in April; at the same time, the average hourly earnings of production and non-supervisory employees decreased by 14 cents to $25.00 an hour....employers also reported that the average workweek for all private payroll employees gained a half hour to 34.7 hours in May, while hours for production and non-supervisory personnel was up six-tenths of an hour to 34.1  hours...meanwhile, the manufacturing workweek rose eight-tenths of a hour to 38.9 hours, while average factory overtime rose three-tenths of a hour to 2.4 hours...

Meanwhile, the seasonally adjusted extrapolation from the May household survey estimated indicated that the number of those who were employed rose an estimated 3,839,000 to 137,242,000, while the similarly estimated number of those who were unemployed fell by 2,093,000 to 20,985,000; which thus meant a rounded increase of 1,746,000 in the total labor force...since the working age population had grown by 151,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 1,595,000 to 101,820,000....meanwhile, the big increase of those in the labor force as a percentage of the increasing working age population was enough to raise the labor force participation rate from 60.2% to 60.8%....likewise, the big increase in number employed vis a vis the increase in the population was enough to raise the employment to population ratio, which we could think of as an employment rate, from 51.3% to 52.8%...in addition, the decrease in the number counted as unemployed was enough to lower the unemployment rate from 14.7% to 13.3%...meanwhile, the number who reported they were involuntarily working part time fell by 254,000 to 10,633,000 in May, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from a record high of 22.8% in April to 21.2% in May...

The BLS provides us with a few caveats on that household survey data, which we'll just excerpt from here:

The household survey is generally collected through in person and telephone interviews, but personal interviews were not conducted for the safety of interviewers and respondents. The household survey response rate, at 67 percent, was about 15 percentage points lower than in months prior to the pandemicIn the household survey, individuals are classified as employed, unemployed, or not in the labor force based on their answers to a series of questions about their activities during the survey reference week (May 10th through May 16th). Workers who indicate they were not working during the entire survey reference week and expect to be recalled to their jobs should be classified as unemployed on temporary layoff.  In May, a large number of persons were classified as unemployed on temporary layoff. However, there was also a large number of workers who were classified as employed but absent from work. As was the case in March and April, household survey interviewers were instructed to classify employed persons absent from work due to coronavirus-related business closures as unemployed on temporary layoff. However, it is apparent that not all such workers were so classified. BLS and the Census Bureau are investigating why this misclassification error continues to occur and are taking additional steps to address the issue. If the workers who were recorded as employed but absent from work due to “other reasons” (over and above the number absent for other reasons in a typical May) had been classified as unemployed on temporary layoff, the overall unemployment rate would have been about 3 percentage points higher than reported (on a not seasonally adjusted basis). However, according to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses.

Hence, as with the establishment survey, we can expect to see quite a bit of rehashing of the household survey next week as the analysts try to sort it all out. ..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 directly 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..   

April Trade Deficit Increases 16.7% After March Trade Deficit Revised 4.7% Lower

Our trade deficit was 16.7% greater in April, as both our imports and exports decreased, but our exports decreased by more...the Commerce Dept report on our international trade in goods and services for April indicated that our seasonally adjusted goods and services trade deficit rose by a rounded $7.1 billion to $49.4 billion in April, from a March deficit that was revised from the originally reported $44.4 billion to $42.3 billion, a revision which would normally result in an upward revision of about 0.13 percentage points to 1st quarter GDP when the third estimate is released at the end of June;  however, this month’s report reflects revised statistics on trade in goods on both a Census basis and a balance of payments (BOP) basis going back to 2015, and revised statistics on trade in services beginning with 1999, so the 4th quarter basis for 1st quarter growth in trade would also need to be revised to determine the ultimate impact...

In rounded numbers, the value of our April exports fell by $38.9 billion, or 20.5%, to $151.3 billion on a $32.2 billion decrease to $95.5 billion in our exports of goods and a $6.7 billion decrease to $55.8 billion in our exports of services, while our imports fell by $26.4 billion, or 13.7% to $167.4 billion on a $26.4 billion decrease to $167.4 billion in our imports of goods and a $5.4 billion decrease to $33.3 billion in our imports of services...export prices averaged 3.3% lower in April, which would mean that real exports would be relatively greater than their nominal value by that percentage, while import prices were 2.6% lower, meaning that our real imports were likewise greater than their nominal change in value by that percentage..

The decrease in our April exports of goods came about largely as a result of lower exports of capital goods, of industrial supplies and materials and of automotive goods.....referencing the Full Release and Tables for April (pdf), in Exhibit 7 we find that our exports of capital goods fell by $10,115 million to $32,349 million on a $2,189 million decrease in our exports of engines for civilian aircraft, a $2,072 million decrease in our exports of civilian aircraft, a $961 million decrease in our exports of industrial machines other than those itemized separately, an $867 million decrease in our exports of electrical apparatuses, a $618 million decrease in our exports of parts for civilian aircraft, a $504 million decrease in our exports of industrial engines, a $431 million decrease in our exports of telecommunications equipment, and a $422 million decrease in our exports of measuring, testing, control instruments...at the same time, our exports of industrial supplies and materials fell by $9,133 million to $33,903 million on a $1,980 million decrease in our exports of crude oil, a $1697 million decrease in our exports of fuel oil, a $822 million decrease in our exports of petroleum products other than fuel oil, a $487 million decrease in our exports of industrial supplies other than those itemized separately, a $452 million decrease in our exports of plastic materials, a $449 million decrease in our exports of finished metal shapes, and a $328 million decrease in our exports of natural gas liquids...meanwhile, our exports of automotive vehicles, parts, and engines fell by $7,374 million to $3,826 million on a $2588 million decrease in our exports of parts and accessories of vehicles other than engines, chassis, and tires, a $2448 million decrease in our exports of passenger cars, a $1233 million decrease in our exports of trucks, buses, and special purpose vehicles, and a $919 million decrease in our exports of automotive engines and engine parts...in addition, our exports of consumer goods fell by $4,399 million to $10,387 million on a $717 million decrease in our exports of cell phones, a $689 million decrease in our exports of gem diamonds, and a $495 million decrease in our exports of art, antiques, and other collectibles, our exports of foods, feeds and beverages fell by $44 million to $10,739 million despite a $396 million increase in our exports of soybeans, and our exports of other goods not categorized by end use fell by $904 million to $4,412 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and indicates that lower imports of automotive goods, or capital goods, and of consumer goods were largely responsible fo the April decrease in our imports...our imports of automotive vehicles, parts and engines fell by $14,557 million to $13,345 million on a $6,853 million decrease in our imports of new and used passenger cars, a $4,131 million decrease in our imports of parts and accessories of vehicles other than engines, chassis, and tires, a $2,301 million decrease in our imports of trucks, buses, and special purpose vehicles, and a $1089 million decrease in our imports of automotive engines and engine parts...meanwhile, our imports of capital goods fell by $5,351 million to $48,171 million on a $1442 million decrease in our imports of semiconductors, a $765 million decrease in our imports of electric apparatuses. a $727 million decrease in our imports of civilian aircraft, a $684 million decrease in our imports of civilian aircraft engines,  a $502 million decrease in our imports of parts for civilian aircraft, a $411 million decrease in our imports of generators and accessories and a $403 million decrease in our imports of measuring, testing, control instruments...at the same time, our imports of consumer goods fell by $3,096 million to $43,792 million on a $1,176 million decrease in our imports of pharmacueticals, a $1,088 million decrease in our imports of cotton apparel and household goods, a $757 million decrease in our imports of gem diamonds, a $625  million decrease in our imports of jewelry, and a $454 million decrease in our imports of art, antiques, and other collectibles...in addition, our imports of foods, feeds, and beverages fell by $767 million to $12,062 million and our imports of other goods not categorized by end use fell by $2310 million to $7,552 million...on the other hand, our imports of industrial supplies and materials rose by $299 million to $41,423 million on a $4,457 million increase in our imports non-monetary gold and a $3057 million increase in our imports of finished metal shapes, which were mostly offset by a $3,870 million decrease in our imports crude oil, $1,513 million decrease in our imports of petroleum products other than fuel oil, and a $589 million decrease in our imports of precious metals other than gold..

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

The April figures show surpluses, in billions of dollars, with South and Central America ($2.9), OPEC ($1.4), Brazil ($0.8), Saudi Arabia ($0.3), and Hong Kong (less than $0.1). Deficits were recorded, in billions of dollars, with China ($26.0), European Union ($14.3), Germany ($4.0), Japan ($3.6), Mexico ($3.3), South Korea ($2.3), Taiwan ($2.2), Italy ($2.0), India ($1.9), France ($1.4), Singapore ($1.1), Canada ($0.4), and United Kingdom ($0.4).

  • • The deficit with China increased $9.0 billion to $26.0 billion in April. Exports increased $2.1 billion to $9.3 billion and imports increased $11.0 billion to $35.2 billion.
  • • The surplus with South and Central America decreased $2.1 billion to $2.9 billion in April. Exports decreased $4.3 billion to $8.7 billion and imports decreased $2.2 billion to $5.8 billion.
  • • The deficit with Mexico decreased $5.6 billion to $3.3 billion in April. Exports decreased $7.0 billion to $12.4 billion and imports decreased $12.6 billion to $15.8 billion.

To gauge the impact of April’s trade on 2nd quarter growth, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2012 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that they are not annualized in the table here...from this table, we can figure that 1st quarter real exports of goods averaged 147,392 million monthly in 2012 dollars, while April’s inflation adjusted exports were at 113,820 million in that same 2012 dollar quantity index representation... annualizing the change between those two figures, we find that April's real exports of goods were falling at a 64.4% annual rate from those of the 1st quarter, or at a pace that would subtract about 7.55 percentage points from 2nd quarter GDP if it were continued through May and June.....from that same table, we can figure that our 1st quarter real imports averaged 221,310 million monthly in chained 2012 dollars, while inflation adjusted April imports were at 193,800 million in that same 2012 dollar representation...that would indicate that so far in the 2nd quarter, our real imports have decreased at a 41.2% annual rate from those of the 1st quarter...since imports are subtracted from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 41.2% rate would conversely add 6.22 percentage points to 2nd quarter GDP....hence, if the April trade deficit is maintained at the same level throughout the 2nd quarter, our deteriorating balance of trade in goods would subtract about 1.33 percentage points from the growth of 2nd quarter GDP....note that we have not estimated the impact of the change in services here because the Census does not provide handy inflation adjusted data on those, but that with our nominal exports of services down $6.7 billion while our imports of services were down $5.4 billion, we can expect our deterioration balance of services trade to also have a negative impact on 2nd quarter GDP...

Construction Spending Down 2.9% in April After Prior Months Revised Much Higher

The Census Bureau's report on construction spending for April (pdf) estimated that the month's seasonally adjusted construction spending was at a $1,346.2 billion annual rate during the month, down 2.9 percent (±0.8 percent) from the revised March annualized rate of $1,386.6 billion, but 3.0 percent (±1.5 percent) above the estimated annualized level of construction spending in April of last year...the annualized March construction spending estimate was revised 1.9% higher, from $1,360.5 billion to $1,386.6 billion, while the annual rate of construction spending for February was revised 2.8% higher, from $1,348.4 billion to $1,386.3 billion...taken together, those revisions would suggest an upward revision of around 0.54 percentage points to 1st quarter GDP when the third estimate is released at the end of June...

A further breakdown of the different subsets of construction spending 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 $1,004.1 billion, 3.0 percent (±0.7 percent) below the revised March estimate of $1,035.6 billion. Residential construction was at a seasonally adjusted annual rate of $536.8 billion in April, 4.5 percent (±1.3 percent) below the revised March estimate of $561.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $467.3 billion in April, 1.3 percent (±0.7 percent) below the revised March estimate of $473.6 billion.
  • Public Construction In April, the estimated seasonally adjusted annual rate of public construction spending was $342.1 billion, 2.5 percent (±1.5 percent) below the revised March estimate of $351.0 billion. Educational construction was at a seasonally adjusted annual rate of $78.6 billion, 2.3 percent (±1.5 percent) below the revised March estimate of $80.4 billion. Highway construction was at a seasonally adjusted annual rate of $106.1 billion, 5.2 percent (±4.6 percent) below the revised March estimate of $111.9 billion

This construction spending report is used as source data for 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and as government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of April's construction spending reported in this release on 2nd quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price...there are many different price indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf) that are used by the BEA to make those inflation adjustments, so in lieu of trying to adjust for price changes for all of those types of construction separately, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an estimate...that index showed that aggregate construction costs were up 0.5% from March to April, up 0.1% from February to March and up 0.1% from January to February....

On that basis, we can estimate that April construction costs were roughly 0.6% greater than those of February and 0.7% greater than those of January, and obviously 0.5% greater than those of March...we then use those percentage differences to inflate spending for each of those three months, which is arithmetically the same as deflating April construction spending against the first quarter, for comparison purposes...construction spending in millions of dollars for the first quarter months is given as 1,386,579 for March, 1,386,266 for February, and 1,382,963 for January...thus to find the difference between April's inflation adjusted construction spending and the adjusted construction spending of the first quarter, our formula becomes: 1,346,166 / (( 1,386,579 * 1.005 + 1,386,266 * 1.006 + 1,382,963 * 1.007) / 3) = 0.96598, meaning real construction spending in April was down roughly 3.4% vis a vis the 1st quarter, or down at a 12.93% annual rate....to figure the potential effect of that change on 2nd quarter GDP,  we take the annualized difference between the first quarter average inflation adjusted construction spending and April's spending as a fraction of the annualized 1st quarter GDP figure, and from that estimate that real April construction spending was falling at a rate that would subtract about 1.20 percentage points from the growth rate of 2nd quarter GDP…

Factory Shipments Down 13.5% in April, Factory Inventories Down 0.4% on Lower Prices

The April Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $4.0 billion or 0.8 percent to $499.3 billion in April, following a decrease of 11.0% to $441.8 billion in March, which was revised from the 10.3% decrease to $445.8 billion reported for March last month....however, the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", and uses non-durables shipments data instead, which would have to be particularly fraught given the supply chain problems we've had recently...for example, it's likely that there were more orders for household paper products in April than the factories were able to ship, but this report would only count those items that had actually shipped at being ordered..

Given the Census's bureau's questionable method of estimating orders, then, we believe that both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the April advance report on durable goods we reported on last week...on those revisions, the Census Bureau's summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we'll just quote directly from that here:

  • Summary: New orders for manufactured goods in April, down three of the last four months, decreased $57.5 billion or 13.0 percent to $384.3 billion, the U.S. Census Bureau reported today. This followed an 11.0 percent March decrease. Shipments, down four consecutive months, decreased $63.6 billion or 13.5 percent to $406.8 billion. This followed a 5.5 percent March decrease. Unfilled orders, down two consecutive months, decreased $17.6 billion or 1.6 percent to $1,107.6 billion. This followed a 2.1 percent March decrease. The unfilled orders-to-shipments ratio was 7.62, up from 6.70 in March. Inventories, down four consecutive months, decreased $2.6 billion or 0.4 percent to $686.5 billion. This followed a 1.1 percent March decrease. The inventories-to-shipments ratio was 1.69, up from 1.46 in March.
  • New orders for manufactured durable goods in April, down three of the last four months, decreased $36.3 billion or 17.7 percent to $168.7 billion, down from the previously published 17.2 percent decrease. This followed a 16.7 percent March decrease. Transportation equipment, also down three of the last four months, led the decrease, $24.3 billion or 48.3 percent to $26.1 billion. New orders for manufactured nondurable goods decreased $21.2 billion or 9.0 percent to $215.6 billion.
  • Shipments of manufactured durable goods in April, down three of the last four months, decreased $42.4 billion or 18.2 percent to $191.2 billion, down from the previously published 17.7 percent decrease. This followed a 5.5 percent March decrease. Transportation equipment, also down three of the last four months, led the decrease, $31.7 billion or 43.1 percent to $41.8 billion. Shipments of manufactured nondurable goods, down four consecutive months, decreased $21.2 billion or 9.0 percent to $215.6 billion. This followed a 5.4 percent March decrease. Petroleum and coal products, also down four consecutive months, led the decrease, $11.9 billion or 32.0 percent to $25.4 billion.
  • Unfilled orders for manufactured durable goods in April, down two consecutive months, decreased $17.6 billion or 1.6 percent to $1,107.6 billion, unchanged from the previously published decrease. This followed a 2.1 percent March decrease. Transportation equipment, also down two consecutive months, led the decrease, $15.7 billion or 2.0 percent to $759.6 billion.
  • Inventories of manufactured durable goods in April, up two consecutive months, increased $0.6 billion or 0.2 percent to $425.3 billion, unchanged from the previously published increase. This followed a 0.5 percent March increase. Transportation equipment, up twenty-one of the last twenty-two months, led the increase, $0.4 billion or 0.3 percent to $143.0 billion. Inventories of manufactured nondurable goods, down four consecutive months, decreased $3.2 billion or 1.2 percent to $261.2 billion. This followed a 3.5 percent March decrease. Petroleum and coal products, also down four consecutive months, drove the decrease, $3.7 billion or 12.1 percent to $27.1 billion. By stage of fabrication, April materials and supplies increased 2.3 percent in durable goods and decreased 1.2 percent in nondurable goods. Work in process decreased 0.7 percent in durable goods and 1.5 percent in nondurable goods. Finished goods decreased 1.2 percent in durable goods and 1.1 percent in nondurable goods.

To estimate the effect of those April factory inventories on 2nd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the total value of finished goods inventories fell by 1.2% to $245,836 million; the value of work in process inventories fell 0.9% to $201,855 million, and the value of materials and supplies inventories rose 0.9% to $238,785 million...the April producer price index reported that prices for finished goods were on average 3.3% lower, that prices for intermediate processed goods were on average 3.7% lower, while prices for unprocessed goods were 13.7% lower....assuming similar valuations for like types of inventories, those lower prices would suggest that April's real finished goods inventories were about 2.1% greater, that real inventories of intermediate processed goods were roughly 2.8% greater, and real raw material inventory inventories were about 14.7% greater, with a caveat on the later that much of raw material price drop in April was in energy goods, the impact of which could be distorted by our simplistic calculation...nonetheless, since real NIPA factory inventories were much lower in the 1st quarter, and this report seems to indicate a large increase in April’s real inventories, it appears that the real change in April factory inventories will have a very large positive impact on the growth rate of 2nd quarter GDP...

 

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

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