Sunday, September 27, 2020

August’s durable goods, new and existing home sales

Widely watched monthly reports that were released this past week included the August advance report on durable goods and the August report on new home sales, both from the Census bureau, and the Existing Home Sales Report for August from the National Association of Realtors (NAR)....this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for August, a weighted composite index of 85 different economic metrics, which fell to +0.79 in August from +2.54 in July, after the July index was revised from +1.18 to +2.54; that left the 3 month moving average of the index at +3.05 in August, down from a revised +4.23 in July, which supposedly still indicates that national economic activity has been way above the historical trend over the summer months...

This week also saw the release of two more regional Fed manufacturing surveys for September: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index ​rose from +1​8​ in August to​ +21 in September, indicative of​ moderately strong growth of that region's manufacturing, while the Kansas City Fed manufacturing survey, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index ​slipped to +11​ in September, down slightly​ ​from ​+14 in August but ​​​up​ from​ +3 in July, still suggesting ​modest growth of that region's manufacturing... 

August Durable Goods: New Orders Up 0.4%, Shipments Down 0.3%, Inventories Down 0.1%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for August (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods grew by $1.0 billion or 0.4 percent to $232.8 billion in August, after rising by a revised 11.7% in July....July's new orders were revised from the $230.7 billion reported last month to $231.8 billion, with the month over month percentage increase thus revised from 11.2% to 11.7%...however, even after four consecutive increases, year to date new orders are still 11.3% below those of 2019, an increase from the -12.1% year over year change we saw in this report last month....

The volatile new orders for transportation equipment rose $0.3 billion or 0.5% to $74,769, which was reduced by the cancellation of $2,784 million in orders for commercial aircraft...excluding new orders for transportation equipment, other new orders were also up 0.4% in August, led by a 1.5% or $0.5 billion increase $31.2 billion in new orders for machinery, which in turn led new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment intentions, to rise 1.8% to $67,703 million...

Meanwhile, the seasonally adjusted value of August's shipments of durable goods, which will be inputs into various components of 3rd quarter GDP after adjusting for changes in prices, decreased by $0.7 billion or 0.3 percent to $244.1 billion, after the value of July's shipments was revised from $244.0 billion to $244.8 million, thus revising the previously reported July shipments increase of 7.3% to one of 7.6% from June....a decrease in shipments of transportation equipment was responsible for the August decrease, as such shipments fell $1.4 billion or 1.7 percent to $81.6 billion, while shipments excluding transportation equipment rose 0.5% to $162.5 billion...meanwhile, shipments of nondefense capital goods excluding aircraft rose 1.5% to $67,165, after rising 2.8% in July, and are thus on track to make a significant contribution to 3rd quarter GDP...

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for the third consecutive month, decreasing by $0.5 billion or 0.1 percent to $420.5 billion, with July's inventories revised from $422.6 billion to $421.0 billion at the same time, now an 0.8% decrease from June...a  decrease in inventories of machinery led the August inventory decrease, as they fell $0.4 billion or 0.6 percent to $69.1 billion...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, fell for the 5th time in 6 months, decreasing by $6.3 billion or 0.6 percent to $1,078.4 billion, after July's unfilled orders fell 0.7% to $1,084.8 billion from June, revised from the 0.8% decrease to $1,084.4 billion reported last month...a $6.9 billion or 0.9 percent decrease to $728.0 billion in unfilled orders for transportation equipment was responsible for the August decrease, while unfilled orders other than those for transportation equipment rose 0.2% to $350.4 billion.... compared to a year earlier, the unfilled order book for durable goods is now 6.2% below the level of last August, with unfilled orders for transportation equipment 8.9% below their year ago level, largely on a 15.3% decrease in the backlog of orders for commercial aircraft...

August New Home Sales Reported at a 14 Year High After Prior Months Sales Were Revised Much Higher

The Census report on New Residential Sales for August (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 1,011,000 new homes a year, which was the highest since September 2006, 4.8 percent (±10.5 percent)* above the revised July rate of 965,000 new single family home sales a year, and 43.2 percent (±19.5 percent) above the estimated annual rate that new homes were selling at in August of last year....the asterisk indicates that based on their small sampling, Census could not be certain whether August new home sales rose or fell from those of July, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....hence, these initial new home sales reports are not very reliable and often see significant revisions...with this report, sales new single family homes in July were revised from the annual rate of 901,000 reported last month up to a 965,000 a year rate, while home sales in June, initially reported at an annual rate of 776,000 and revised to a 791,000 a year rate last month, were revised up to a 841,000 a year rate with this report, and while May's annualized home sale rate, initially reported at a 676,000 rate and revised from a 682,000 a year to a 687,000 rate last month, were revised up to a 698,000 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 83,000 new single family homes sold in August, same as the estimated 83,000 new homes that sold in July and up from the 79,000 that sold in June....the raw figures from Census field agents further allowed for estimates that the median sales price of new houses sold in August was $312,800, down from the median sales price of $327,800 in July and down from the median sales price of $327,000 in August a year ago, and that the average August new home sales price was at $369,000, down from the $371,900 average sales price in July, and down from the average sales price of $392,700 in August a year ago....a seasonally adjusted estimate of 282,000 new single family houses remained for sale at the end of August, which represents a 3.3 month supply at the August sales rate, down from the revised 3.6 month supply of unsold homes in July, which was originally reported as a 4.0 month supply....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales increased to 1,011,000 Annual Rate in August and A few Comments on August New Home Sales..

August Existing Home Sales Rose 2.4% to a 13 Year High

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose 2.4% from July to August, projecting that 6.00 million homes would sell over an entire year if the August home sales pace were extrapolated over that year, a pace that was also 10.5% above the 5.43 annual sales rate they projected in August of a year ago….July's sales, at a 5.86 million annual rate, were revised but unchanged from last month's report...the NAR also reported that the median sales price for all existing-home types was $310,600 in August, 11.4% higher than in August a year earlier, which they report "marks 102 straight months of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Hit Highest Level Since December 2006", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed  sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 561,000 homes sold in August, down by 6.0% from the 597,000 homes that sold in July, but up by 5.5% from the 532,000 homes that sold in August of last year, so we can see that it was the seasonal adjustment that caused the annualized published figure for August to show a monthly increase and a record high...that same pdf indicates that the median home selling price for all housing types rose by 1.7%, from a revised $305,500 in July to $310,600 in August, while the national average home sales price was $342,500, up 1.3% from the $338,000 average in July, and up 8.8% from the $314.900 average home sales price of August a year ago, with the regional average home sales prices ranging from a low of $274,500 in the Midwest to a high of $450,700 in the West....for both seasonally adjusted and unadjusted graphs and additional commentary on this report, check out the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 6.00 million in August and Comments on August Existing Home Sales...

 

 

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

Sunday, September 20, 2020

August’s retail sales, industrial production, new home construction and business inventories

Widely watched monthly reports that were released this past week included the Retail Sales Report for August and the Business Sales and Inventories report for July, both from the Census bureau, the August Industrial Production and Capacity Utilization report from the Fed, and the August report on New Residential Construction from the Census Bureau...in addition, the Bureau of Labor Statistics released the Regional and State Employment and Unemployment report for August, a report which breaks down the two employment surveys from the monthly national jobs report by state and region....while the text of this report provides a useful summary of this data, the serious statistics aggregation can be found in the tables linked at the end of the report, where one can find the civilian labor force data and the change in payrolls by industry for each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands...

This week also saw the release of the first two regional Fed manufacturing surveys for September: the Empire State Manufacturing Survey from the New York Fed, which covers New York, northern New Jersey and Puerto Rico, reported their headline general business conditions index rose from +3.7 in August to +17.0 in September, suggesting a faster pace of growth for First District manufacturers, while the Philadelphia Fed Manufacturing Survey for September, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions fell from +17.2 in August to +15.0 in September, suggesting a slightly slower growth rate among that region's manufacturers...  

Retail Sales Rose 0.6% in August after July's Sales Were Revised 0.3% Lower

Seasonally adjusted retail sales rose 0.6% in August after retail sales for July were revised lower...the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $537.5 billion during the month, which was up 0.6 percent (±0.5%)* from July's revised sales of $534.6 billion and 2.6 percent (± 0.7 percent) above the adjusted sales in August of last year...July's seasonally adjusted sales were revised down from the $536.0 billion reported last month to $534.6 billion, while June sales were revised 0.1% higher, from $529.4 billion to $529.962 billion, with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 0.9%, from $550,941 million in July to $545,890 million in August, while they were up just 0.1% from the $545,247 million of sales in August a year ago...the revision to June’s sales means that 2nd quarter sales were more than $2.2 billion higher at an annual rate than was previously reported, which would be enough to add 0.03 percentage point to 2nd quarter GDP when the 3rd estimate is published at the end of the month…

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the August Census Marts pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from July to August in the first sub-column, and then the year over year percentage change for those businesses since last August in the 2nd column; the second pair of columns gives us the revision of last month’s July advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the June to July change under "Jun 2020 (r)evised", and the revised July 2019 to July 2020 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance July sale estimates, before this month's revision, is here....

August 2020 retail sales table

To compute August's real personal consumption of goods data for national accounts from this August retail sales report, the BEA will use the corresponding price changes from the August consumer price index, which we reviewed last week….to estimate what they will find, we’ll start by pulling out the usually volatile sales of gasoline from the other totals...from the third line on the above table, we can see that August retail sales excluding the 0.4% increase in sales at gas stations were also up by 0.6%....then, subtracting the figures representing the 1.2% decrease in grocery & beverage store sales and the 4.7% increase in food services sales from that total, we find that core retail sales were virtually unchanged month over month...since the August CPI report showed that the the composite price index of all goods less food and energy goods was 1.0% higher in August, we can thus figure that real retail sales excluding food and energy, or real core PCE, will show a decrease of about 1.0% for the month...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 up 0.2%, the August price index for transportation commodities other than fuel was 2.1% higher, which would suggest that real sales at auto & parts dealers were about 1.9% lower once price increases are taken into account... similarly, while nominal sales at clothing stores were 2.9% higher in August, the apparel price index was 0.6% higher, which means that real sales of clothing likely rose by about 2.3%…and in the lone case where August’s prices for a major goods category fell, we see that sales at drug stores were up 0.8% while prices for medical care commodities were 0.1% lower, which suggests that real sales at drug stores rose 0.9%…

In addition to figuring those core retail sales, to make a complete estimate of real July PCE, we should also adjust food and energy retail sales for their price changes separately, just as the BEA will do…the August CPI report showed that the food price index rose 0.1% in August, as the price index for food purchased for use at home fell 0.1% while the index for food bought away from home was 0.3% higher...thus, while nominal sales at food and beverage stores were 1.2% lower in August, prices were 0.1% lower, which means that real sales of food and beverages would be roughly 1.1% lower…on the other hand the 4.7% nominal increase in sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests real sales at bars and restaurants rose by 4.4% for the month...meanwhile, while sales at gas stations were up 0.4%, there was a 2.0% increase in the retail price of gasoline, which would suggest real sales of gasoline were on the order of 1.6% lower, with a caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales…by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we’d estimate that the income and outlays report for August will show that real personal consumption of goods fell by about 1.1% in August, after rising by a revised 1.3% in July and by a revised 5.8% in June, after rising by 14.4% in May, after falling by 12.5% in April and by 0.7% in March...at the same time, the 4.4% increase in real sales at bars and restaurants will have a positive impact on the order of +0.3% on August's real personal consumption of services...

Industrial Production Rose 0.4% in August after June & July Revised Higher

The Fed's August report on Industrial production and Capacity Utilization indicated that industrial production rose by 0.4% in August, after rising by a revised 3.5% in July and a revised 6.1% in June...however, even with those increases, industrial production is still down 7.7% from a year ago, and down 7.5% from its pre-pandemic level....the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 101.4 in August from 101.0 in July, which was revised up from the 100.2 that was reported for July a month ago...at the same time, the June reading for the index was revised from 97.2 to 97.5, the May index was revised from 92.0 to 91.9, the April index was revised from 91.2 to 91.0, and the March index was revised from 104.6 to 104.5...

The manufacturing index, which accounts for more than 75% of the total IP index, rose by 1.0%, from 97.0 in July to 97.9 in August, after July's manufacturing index was revised from 96.5 to 97.0, June's manufacturing index was revised but unchanged at 93.4, May's manufacturing index was revised from 87.0 to 86.9, April's manufacturing index was revised from 83.8 to 83.6, and the March manufacturing index was revised from 99.7 to 99.6...even with the August increase, the manufacturing index is still down by 6.9% from a year ago....meanwhile, the mining index, which includes oil and gas well drilling, fell from 112.5 in July to 109.7 in August, after the July index was revised up from 108.5, as the year over year change in the mining index declined to 17.9% from the 17.0% decrease reported a month ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, slipped by 0.4%, from 105.6 in July to 105.2 in August, after the July utility index was revised down from 105.9, and after the June utility index was revised from 102.5 to 101.7...however, even though last August was generally much cooler than this year, the utility index is only 0.5% above its year ago reading of 104.6..

This report also provides capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose from 71.1% in July to 71.4% in August...capacity utilization of NAICS durable goods production facilities rose from 68.9% in July to 69.4% in August, after July's figure was revised up from 68.1%, while capacity utilization for non-durables producers rose from an unrevised 71.5% to 72.4%...capacity utilization for the mining sector fell to 74.5% in August from 76.2% in July, which was originally reported as 73.5%, while utilities were also operating at 74.5% of capacity during August, down from their 75.0% of capacity during July, which was revised down from 75.2%...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.... 

New Housing Construction Reported Lower in August; Building Permits Little Changed

The August report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units that were started during the month was at a seasonally adjusted annual rate of 1,416,000, which was 5.1 percent (±9.6 percent)* below the revised July estimated annual rate of 1,492,000 housing unit starts, but was 2.8 percent (±10.3 percent)* above last August's pace of 1,279,000 housing starts a year...the asterisks indicate that the Census Bureau does not have sufficient data to determine whether housing starts actually rose or fell from July or even over the past year, with the figures in parenthesis the most likely range of the changes indicated; in other words, August's housing starts could have been up by 4.5% or down by as much as 14.7% from those of July, with a 10% chance that the actual change could have even been outside of that wide range...in this report, the annual rate for July housing starts was revised from the 1,496,000 reported last month to 1,492,000, while June’s housing starts, which were first reported at a 1,186,000 annual rate, were revised up from last month's initial revised figure of 1,222,000 annually to 1,265,000 annually with this report....

Those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 127,300 housing units were started in August, down 8.5% from the 139,100 units started in July...of those housing units started in August, an estimated 93,200 were single family homes and 32,400 were units in structures with more than 5 units, up from the revised 93,100 single family starts in July, but down from the 45,300 units started in structures with more than 5 units in July...

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in August, Census estimated new building permits were being issued for a seasonally adjusted annual rate of 1,470,000 housing units, which was 0.9 percent (±1.4 percent)* below the revised July rate of 1,483,000 permits, and was 0.1 percent (±1.5 percent)* below the rate of building permit issuance in August a year earlier...the annual rate for housing permits issued in July was revised from 1,495,000 to a rate of 1,483,000 annually....

Again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for roughly 125,500 housing units were issued in August, down from the revised estimate of 135,400 new permits issued in July...the August permits included 89,600 permits for single family homes, down from 92,100 in July, and 31,200 permits for housing units in apartment buildings with 5 or more units, down from 39,100 such multifamily permits a month earlier...

For more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: 8:38 AM Housing Starts decreased to 1.416 Million Annual Rate in August and Comments on August Housing Starts...

July Business Sales Up 3.2%, July Business Inventories Up 0.1%

After the release of the August retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for July (pdf), which incorporates the revised July retail data from that August report and the earlier published July factory data and last week’s July wholesale trade report to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,441.1 billion in July, up 3.2 percent (±0.2%) from June’s revised sales, but down 1.2 percent (±0.4 percent) from July's sales of a year earlier...note that total June’s sales were concurrently revised up from the originally reported $1,394.0 billion to $1,396.2 billion with this report, which is now an 8.6% increase from May....manufacturer's sales were up by 4.6% to $479,530 million in July, and retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, rose 0.5% to $482,372 million, while wholesale sales rose 4.6% to $479,151 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,914.3 billion at the end of July, up 0.1% (±0.1%) from June, but 5.9 percent (±0.3 percent) lower than in July a year earlier...the value of end of June inventories was revised up from the $1,912.1 billion reported last month to $1,912.3 billion, which is still down 1.1% from May...seasonally adjusted inventories of manufacturers were estimated to be valued at $687,216 million, 0.5% lower than in June, inventories of retailers were valued at $594,755 million, 1.2% more than in June, while inventories of wholesalers were estimated to be valued at $632,304 million at the end of July, down 0.3% from June...

With the release of the factory inventory data two weeks ago, we judged that the real change in July factory inventories would have a modest negative impact on the growth rate of 3rd quarter GDP; then, with the release of the wholesale inventory last week, we felt that real wholesale inventories would provide substantial boost to 3rd quarter GDP...since the producer price index for July showed that prices for finished goods were on average 0.8% higher, that means that the real increase in retail inventories was only around 0.4% for the month…however, since real retail inventories saw a substantial decrease in the second quarter, any real increase in July retail inventories would thus have a substantial positive impact on 3rd quarter GDP, first by reversing the 2nd quarter drop, and then by incrementally adding to that by the amount of the July increase...

 

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

Sunday, September 13, 2020

August’s consumer prices and producer prices; July’s wholesale trade and JOLTS

Major reports released this past week included the August Consumer Price Index, the August Producer Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) report for July, all from the Bureau of Labor Statistics, and the Wholesale Trade, Sales and Inventories report for July from the Census Bureau...this week also saw the Consumer Credit Report for July from the Fed, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $12.3 billion in July, or at a 3.6% annual rate, as non-revolving credit expanded at a 4.8% rate to $3,144.2 billion while revolving credit outstanding contracted at a 0.4% rate to $994.7 billion...

This week's major privately issued report was the Mortgage Monitor for July (pdf) from Black Knight Financial Services, which reported that 6.91% of mortgages were delinquent in July, down from the 7.59% that were delinquent in June, but well up from the 3.64% delinquency rate of July of 2019, and that a record low 0.36% of mortgages remained in the foreclosure process in July, same percentage as in June, but down from the 0.49% that were in foreclosure a year ago....

Consumer Prices Rose 0.4% in August on Higher Prices for Gasoline, Used Cars, Clothing, & Appliances

The consumer price index rose 0.4% in August, as higher prices for gasoline, used vehicles, appliances, clothing, and vehicle rentals were only partly offset by lower prices for groceries and utilities ...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.4% in August, after rising by 0.6% in July and by 0.6% in June, falling by 0.1% in May, falling by 0.8% in April and by 0.4% in March, but after rising by 0.1% in February, by 0.1% in January, by 0.2% in December, 0.2% in November, 0.2% in October, 0.1% in September, and rising by 0.1% last August...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 259.101 in July to 259.918 in August, which left it statistically 1.3096% higher than the 256.558 index reading of August of last year, which is reported as a 1.3% year over year increase, up from the 1.0% year over year increase reported a month ago....with higher prices for energy offset by lower prices for groceries, seasonally adjusted core prices, which exclude food and energy, also rose by 0.4% for the month, as the unadjusted core price index rose from 267.703 to 268.756, which left the core index 1.7364% ahead of its year ago reading of 264.169, which is reported as a 1.7% year over year increase, up from the 1.6% the year over year increase that was reported for July...

The volatile seasonally adjusted energy price index rose 0.9% in August, after rising 2.5% in July, 5.1% in June, falling by 1.8% in May, by 10.1% in April, 5.8% in March, 2.0% in February and by 0.7% in January, but after rising 1.6% in December, 0.8% in November and by 1.7% in October, but after falling 0.8% in September, falling 1.4% in August and rising 0.9% last July, and is still 9.0% lower than in August a year ago...the price index for energy commodities was 2.0% higher in August, while the index for energy services was 0.2% lower, after being unchanged in July....the energy commodity index was up 2.0% due to a 2.0% increase in the price of gasoline, the largest component, and a 3.9% increase 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 0.2% after falling 1.0% in July and is now 0.5% lower than it was a year ago, while the electricity price index fell 0.2% after rising 0.3% in July....energy commodities are still averaging 16.7% lower than their year ago levels, with gasoline prices averaging 16.8% lower than they were a year ago, while the energy services price index is now down 0.1% from last August, as electricity prices are also 0.1% lower than a year ago…

The seasonally adjusted food price index rose 0.1% in August, after falling 0.4% in July, rising 0.6% in June, 0.7% in May, 1.5% in April, 0.3% in March, 0.4% February, 0.2% January, 0.2% December, 0.1% in November, 0.2% October, 0.2% September, but after being unchanged last June, July & August, as the price index for food purchased for use at home was 0.1% lower in August, after falling 1.1% in July, while the index for food bought to eat away from home was 0.3% higher, as average prices at fast food outlets were 0.4% higher and prices at full service restaurants rose 0.1%, while this month’s data for food prices at employee sites and schools is missing...

In the food at home categories, the price index for cereals and bakery products was 0.2% lower even though average bread prices rose 0.5%, because the price index for fresh cakes and cupcakes fell 2.2%, the price index for frozen and refrigerated bakery products, pies, tarts, and turnovers fell 1.7%, and the price index for breakfast cereal fell 2.0%....at the same time, the price index for the meats, poultry, fish, and eggs group was 1.7% lower as the price index for beef and veal fell 4.4%, egg prices fell 3.0%, and the price index for pork was 2.0% lower... on the other hand, the seasonally adjusted index for dairy products was 1.5% higher, as milk prices rose 3.6% and the index for cheese and related products was 2.6% higher...in addition, the fruits and vegetables index was 0.2% higher as the price index for fresh fruits rose 1.4%, the price index for dried beans, peas, and lentils rose 1.9%, and the price index for frozen fruits and vegetables rose 0.7%...meanwhile, the beverages price index was 0.1% higher as the price index for tea and beverage materials other than coffee rose 1.3%....lastly, the price index for the ‘other foods at home’ category was 0.5% higher, as the price index for sugar and sweets rose 0.9%, prices for peanut butter rose 1.0%, the price index for olives, pickles, relishes rose 2.2% and the price index for prepared salads rose 2.1%...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 August, the price index for uncooked beef roasts has risen 12.1%, the price index for beef and veal other than those cuts listed separately rose 10.0%, the price index for pork other than chops, ham and bacon is up 14.7%, the price index for poultry other than chicken is 11.3% higher, and the price index for dried beans, peas, and lentils is up 10.3% over the  year, while only apples, bananas and instant coffee prices have declined over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.4% in August, after rising by 0.6% in July and by 0.2% in June, falling by 0.1% in May, by 0.4% in April and by 0.1% in March, but after rising by 0.2% in February, 0.2% in January, 0.1% December, 0.2% November, 0.1% October, 0.2% in September, 0.2% in August, and by 0.3% last July, the composite price index of all goods less food and energy goods was 1.0% higher in August, while the more heavily weighted composite for all services less energy services was 0.2% higher....

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust August's retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 1.0% higher, as the price index for major appliances rose 4.8% on a 5.6% increase in prices for laundry equipment, the price index for window coverings rose 3.7%, and the price index for dishes and flatware increased by 2.9%....at the same time, the apparel price index was 0.6% higher on a 5.1% increase in the price index for men's pants and shorts, a 4.9% increase in the price index for women's dresses, a 2.0% increase in the price index for girls's apparel, and a 2.0% increase in the price index for women's footwear...in addition, the price index for transportation commodities other than fuel was 2.1% higher even as new car prices were unchanged as prices for used cars and trucks rose 5.4% and tire prices rose 0.5%....however, prices for medical care commodities were 0.1% lower, as prescription drugs prices fell 0.2% and the price index for medical equipment and supplies fell 1.2%...on the other hand, the recreational commodities index was 1.1% higher on a 4.2% increase in the price index for video equipment other than TVs, a 15.0% increase in the price index for sewing machines, fabric and supplies, a 2.2% increase in the price index for recorded music and music subscriptions, and a 1.9% increase in the price index for pets, pet supplies, accessories...at the same time, the education and communication commodities index was 0.5% higher on a 1.0% increase in the price index for computers, peripherals, and smart home assistants and a 0.8% increase in the price index for educational books and supplies...lastly, a separate price index for alcoholic beverages was 0.3% higher, while the price index for ‘other goods’ was down 0.2% on a 3.9% drop in the price index for stationery, stationery supplies, gift wrap..

Within core services, the price index for shelter was 0.1% higher as rents rose 0.1% and homeowner's equivalent rent rose 0.1% while prices for lodging away from home at hotels and motels rose 1.1%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.6%, and other household operation costs were on average 0.5% higher on a 2.6% increase in moving, storage, freight expense....meanwhile, the price index for medical care services was 0.1% higher, as the price index for care of invalids and elderly at home rose 1.1% and the price of health insurance rose 0.9%... at the same time, the transportation services price index was unchanged as the price index for car and truck rental rose 4.0%, airline fares rose 1.2% and vehicle insurance costs rose 0.5%, while intercity bus fares fell 1.5% and the index for intracity mass transit fell 10.3%...meanwhile, the recreation services price index rose 0.5% as the index for admissions to movies, theaters, and concerts rose 1.5%, the index for veterinarian services rose 0.5% and the index for also rose 0.5%....in addition, the index for education and communication services was 0.1% higher as the price index for wireless telephone services rose 0.8% and the index for delivery services rose 0.3%...lastly, the index for other personal services was unchanged as the price index for haircuts and other personal care services fell 0.3% while the index for apparel services other than laundry and dry cleaning was 0.4% higher...

Among core line items, prices for televisions, which are still averaging 12.5% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 14.9% since last August, the price index for men's suits, sport coats, and outerwear, which has fallen 17.1% from a year ago, the price index for women's dresses, which has fallen by 17.0% in the past year, the price index for women's outerwear, which has fallen by 12.5% from a year ago, the price index for women's suits and separates, which has fallen by 11.6% in the past year, the price index for lodging away from home including hotels and motels, which has fallen by 13.1% in the past year, the price index for Intracity mass transit, which has fallen by 11.8% in the past year, and airline fares, which are now down by 23.2% since last August, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is still up by 17.4% over the past year, the price index for laundry equipment, which has risen 13.7% from a year ago, and the price index for infants' equipment, which is up 10.9% from last August, are the only line items to have increased by a double digit magnitude over that span....  

Producer Prices rose 0.3% in August on Higher Trade Margins, Higher Prices for Core Goods and Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.3% in August, as prices for finished wholesale goods averaged 0.1% higher while margins of final service providers averaged 0.5% higher…that followed a July report that had the PPI 0.6% higher, as prices for finished wholesale goods averaged 0.8% higher while margins of final service providers averaged 0.5% higher, a June report that had the PPI 0.2% lower, even as prices for finished wholesale goods averaged 0.2% higher, because the more heavily weighted margins of final service providers averaged 0.3% lower, a now revised May report that has the PPI 0.8% higher, as prices for finished wholesale goods averaged 1.8% higher, while margins of final service providers averaged 0.3% higher, and a re-revised April report wherein the PPI now fell 1.3%, as prices for finished wholesale goods averaged 3.0% lower, while average margins of final services providers decreased by 0.4%....on an unadjusted basis, producer prices are still 0.2% lower than a year ago, up from the 0.4% year over year decrease indicated by last month's report, while, the core producer price index, which excludes food, energy and trade services, rose by 0.3% for the month, and is now 0.3% higher than in August a year ago, up from the 0.1% year over year increase shown in July...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.1% higher in August, after being 0.8% higher in July, 0.2% higher in June, 1.8% higher in May, 3.0% lower in April, 1.0% lower in March, 0.9% lower in February, 0.3% higher in January, 0.2% higher in December, 0.3% higher in November, 0.5% higher in October, 0.2% lower in September, and 0.3% lower in August of last year....the finished goods index rose 0.1% in August even as the price index for wholesale energy goods was 0.1% lower, after it had risen by 5.3% in July, by 7.7% in June and 6.3% in May, but after it had fallen by 18.2% in April, 9.1% in March, and 3.9% in February, while the price index for wholesale foods fell 0.4%, after falling 0.5% in July, 5.2% in June, rising 6.1% in May, and falling a revised 0.5% in April, while the index for final demand for core wholesale goods (excluding food and energy) was 0.3% higher, after being 0.3% higher in July....wholesale energy prices averaged lower due to a 1.4% decrease in wholesale prices for gasoline and a 38.1% decrease in wholesale prices for home heating oil, while wholesale prices for No.2 diesel fuel rose 6.1%, while the wholesale food price index fell 0.4% on a 9.9% decrease in wholesale prices fro fresh eggs, a 4.2% decrease in the wholesale price index for fresh fruits and melons, and a 3.7% decrease in the wholesale price index for grains....among wholesale core goods, the wholesale price index for plastic resins and materials rose 4.0%, the wholesale price index for mobile homes rose 1.8%, and the wholesale price index for jewelry, platinum and karat gold rose 4.2%...

At the same time, the index for final demand for services rose 0.5% in August, after rising 0.5% in July, falling 0.3% in June, rising a revised 0.3% in May, and falling a revised 0.4% in April, as the index for final demand for trade services rose 1.2%, the index for final demand for transportation and warehousing services rose 0.2%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.3% higher... among trade services, seasonally adjusted margins for automobile retailers rose 10.6%, margins for TV, video, and photographic equipment and supplies retailers rose 4.7%, margins for hardware, building materials, and supplies retailers rose 6.8%, margins for RVs, trailers, and campers retailers rose 23.8%, and margins for machinery and vehicle wholesalers rose 1.7%... among transportation and warehousing services, margins for airline passenger services fell 3.3% while margins for truck transportation of freight rose 1.6%...among the components of the core final demand for services index, the index for securities brokerage, dealing, investment advice, and related services rose 5.0%, the index for portfolio management rose 2.4%, margins for arrangement of cruises and tours rose 36.2%, and margins for passenger car rental rose 2.8%, while margins for arrangement of vehicle rentals and lodging fell 6.0%…

This report also showed the price index for intermediate processed goods rose 0.6% in August, after rising 1.5% in July, 0.9% in June, and a revised 0.4% in May, but after falling a revised 3.6% in April and 1.5% in March....the price index for intermediate energy goods rose 1.7%, as producer prices for natural gas sold to electric utilities rose 11.4%, producer prices for liquefied petroleum gas rose 7.0%, refinery prices for residual fuels rose 10.2%, and refinery prices for No. 2 diesel fuel rose 6.1%...meanwhile, prices for intermediate processed foods and feeds fell 0.5%, as the producer price index for dairy products fell 0.4% and the producer price index for prepared animal feeds fell 0.4%...at the same time, the core price index for intermediate processed goods less food and energy rose 0.5% as the producer price index for plywood rose 10.6%, the producer price index for softwood lumber increased 14.9%, the producer price index for building paper and board rose 10.0%, and the producer price index for copper and brass mill shapes rose 3.2%...prices for intermediate processed goods are still 2.6% lower than in August a year ago, the 16th 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 rose 7.0% in August, after falling 0.7% in July, rising 3.1% in June and a revised 9.6% in May, but after falling a revised 12.6% in April and 8.5% in March....that was as the August price index for crude energy goods rose 11.7% as crude oil prices rose 11.4% and unprocessed natural gas prices rose 22.8%, while the price index for unprocessed foodstuffs and feedstuffs rose 7.0% on a 16.7% increase in producer prices for raw milk, a 24.7% increase in producer prices for slaughter hogs, and a 10.4% increase in producer prices for slaughter cattle...at the same time, the index for core raw materials other than food and energy materials rose 1.7%, as prices for copper base scrap rose 9.0%, the price index for nonferrous metal ores increased 6.5%, and the price of aluminum base scrap rose 3.1%....however, this raw materials index is still 9.0% lower than a year ago, as the year over year change on this index has been negative since the beginning of last year...

Lastly, the price index for services for intermediate demand rose 0.7% in August, after rising 0.7% in July, 0.2% in June, falling revised 0.4% in May, and falling a revised 1.7% in April...the price index for intermediate trade services was 1.2% higher, as margins for intermediate hardware, building material, and supplies retailers rose 6.8% and margins for intermediate metals, minerals, and ores wholesalers rose 5.3%...meanwhile, the index for transportation and warehousing services for intermediate demand was 0.1% lower, as the intermediate price index for arrangement of freight and cargo fell 9.6% and the intermediate price index for transportation of passengers (partial) fell 3.2%...at the same time, the core price index for intermediate services less trade, transportation, and warehousing was 0.9% higher, as the price index for internet advertising space sales (excluding Internet ads sold by print publishers) rose 9.8%, the intermediate price index for securities brokerage, dealing, investment advice, and related services rose 5.0%, and the price index for radio advertising time sales also rose 5.0%...over the 12 months ended in August, the year over year price index for services for intermediate demand is still 0.6% lower than it was a year ago, after turning negative year over year in April for the first time in the history of this index...

July Wholesale Sales Were Up 6.4%; Wholesale Inventories Were Down 0.3%

The July report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $479.2 billion, up 6.4 percent (±0.5 percent) from the revised June level, but down 4.0 percent (±0.9 percent) from wholesale sales of July 2019... the June preliminary estimate was revised up $0.8 billion or 0.2% to $458.1 billion from the $457.3 billion sales reported last month, which is now 9.0% more than May's sales, revised from the 8.8% increase reported last month...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this July report estimated that wholesale inventories were valued at a seasonally adjusted $632.3 billion at month end, down 0.3 percent (+/-0.2%) from the revised June level and 5.6 percent (±0.9 percent) lower than in June a year ago, with the June preliminary estimate revised from the $633.3 billion reported a month ago to $634.2 billion, now a 1.3% decrease from May....

That $0.9 billion upward revision to June wholesale inventories will increase 2nd quarter GDP by about 0.02 percentage points...meanwhile, July's wholesale inventories, after an adjustment for price changes for each category of wholesale goods as indicated by the components of the July producer price index, appears to indicate a real wholesale inventory decrease on the order of 1.1% heading into the 3rd quarter....however, since the key source data and assumptions (xls) for the second estimate of 2nd quarter GDP indicates a real decrease of $49.5 billion in wholesale inventories on a NIPA basis, July's real inventory decrease will fall well short of that drop and hence will result in a substantial boost to 3rd quarter GDP...

Job Openings and Job Quitting were up in July, Hiring and Firing were Down

The Job Openings and Labor Turnover Survey (JOLTS) report for July from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 617,000, from 6,001,000 in June to 6,618,000 in July, after June's job openings were revised 112,000 higher, from the 5,889,000 reported a month ago to 6,001,000 with this report...July's jobs openings were still 8.5% lower than the 7,236,000 job openings reported for July a year ago, as the job opening ratio expressed as a percentage of the employed rose from 4.2% in June to 4.5% in July, but was down from 4.6% in July a year ago....the 172,000 job opening increase to 841,000 openings in the retail trade sector appears to be the largest percentage increase for this month, while the decrease from 725,000 to 663,000 bar and restaurant job openings looks to be the largest percentage decrease... (see table 1 for more details)...like most BLS releases, the press release for 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 July, seasonally adjusted new hires totaled 5,787,000, down by 1,183,000 from the revised 6,970,000 who were hired or rehired in June, as the hiring rate as a percentage of all employed fell from 5.1% in June to 4.1% in July, while it was still up from 4.0% in July a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations rose by 108,000, from 4,899,000 in June to 5,007,000 in July, while the separations rate as a percentage of the employed was unchanged at 3.6%, which was still down from the 3.8% separations rate in July a year ago (see table 3)...subtracting the 5,007,000 total separations from the total hires of 5,787,000 would imply an increase of just 780,000 jobs in July, far less than the revised payroll job increase of 1,734,000 for July reported by the August establishment survey last week....at least some of that difference likely due to the difference in the date of the surveys, which is at month end for this report but is during the week of the 12th for the employment situation...

Breaking down the seasonally adjusted job separations, the BLS finds that 2,949,000 of us voluntarily quit our jobs in July, up by 345,000 from the revised 2,605,000 who quit their jobs in June, while the quits rate, widely watched as an indicator of worker confidence, rose to 2.1% of total employment, up from 1.9% in June but down from 2.4% in July a year earlier (see details in table 4)....in addition to those who quit, another 1,721,000 were either laid off, fired or otherwise discharged in July, down by 274,000 from the revised 1,995,000 who were discharged in June, as the discharges rate fell from 1.4% to 1.2% of all those who were employed during the month, which left it unchanged from the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 337,000 in July, up from 300,000 in June, for an 'other separations’ rate of 0.2%, which was the same rate as in June and as in July 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, September 6, 2020

August’s jobs report; July’s trade deficit, construction spending & factory inventories

In addition to the Employment Situation Summary for August from the Bureau of Labor Statistics, this week also saw the release of three July reports that provide us with initial input data to 3rd quarter GDP, and in some cases suggest revisions to 2nd quarter GDP: the July report on our International Trade from the Bureau of Economic Analysis, and the July report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for July, both from the Census Bureau...In addition, this week saw the release of the last regional Fed manufacturing survey for August: the Dallas Fed's Texas Manufacturing Outlook Survey, which also covers adjacent western Louisiana and southeastern New Mexico, reported its general business activity index rose to +8.0 in August, up from -3.0 in July, and the first positive reading in five months, indicating a tentative recovery in the depressed Texas area economy...

The week’s major privately issued reports included the ADP Employment Report for August; the light vehicle sales report for August from Wards Automotive, which estimated that vehicles sold at a 15.19 million annual rate in August, up from the 14.52 million annual rate reported in July, but down from the 16.99 million annual rate in August a year ago; and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the August Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 56.0% in August, up from 54.2% in July, and the highest reading since November 2018, and the August Services Report On Business; which saw the NMI (non-manufacturing index) slip to 56.9% in August, down from 58.1% in July, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in August than in July...

Employers Added 1,371,000 Jobs in August; Unemployment Rate Fell to 8.4% as 3,756,000 Found Work

The Employment Situation Summary for August indicated that the strong rebound in payroll jobs from their April nadir continued for a 4th consecutive month, and that the unemployment rate fell by 1.8% to 8.4%, while the employment rate rose 1.4% to 56.5%….estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 1,371,000 jobs in August, after the payroll job increase for July was revised down from 1,763,000 to 1,734,000, and the payroll jobs increase for June was revised down from 4,791,000 to 4,781,000…those revisions mean that the combined number of jobs created over those two months was 39,000 less than was previously reported...the unadjusted data shows that there were actually 1,535,000 more payroll jobs in August, after July had seen an end of the school year related decrease of 960,200 education jobs that were adjusted away, so the impact of this month's seasonal adjustments was minor by comparison ...

Seasonally adjusted job increases were spread throughout the private goods producing and service sectors and government, with a 2,000 job drop in the resource extraction trades the only sector showing a decrease...federal government payrolls increased by 251,000, with the hiring of 238,000 temporary 2020 Census workers, while the retail sector saw an increase of 248,900 jobs, with 116,400 workers returning to jobs in general merchandise stores, 22,300 more employed by motor vehicle and parts dealers, and 21,000 returning to jobs in electronics and appliance stores....the broad professional and business services category added 197,000 jobs, as 123,600 workers found jobs with employment services and 14,400 were hired by architectural and engineering services...meanwhile, the leisure and hospitality sector added a seasonally adjusted 174,000 jobs, with the return of of 133,600 jobs in bars and restaurants and 19,100 more employed in performing arts and spectator sports....local government payrolls increased by 95,000, with an increase of 63,300 in local government jobs outside of education and another 31,700 working in local school districts... at the same time, employment in health care and social assistance rose by 90,100, with the addition of 26,500 jobs in doctor's offices and 23,600 jobs in dentist's offices....other increases included the addition of 78,100 jobs in transportation and warehousing, with 34,400 of those in warehousing and storage, and 74,000 more jobs in "other services", which included 30,800 jobs with membership associations and organizations, 28,700 repair and maintenance jobs, and 13,900 jobs with personal and laundry services...there were also 36,000 more jobs in the financial sector, with 23,100 of those in real estate, while employment in manufacturing increased by 29,000, with 12,100 of those working in food manufacturing plants....other August job additions included 16,000 jobs in construction, 15,000 in the information sector, and 13,500 in wholesale trade...

The establishment survey also showed that average hourly pay for all employees rose by 11 cents an hour to $29.47 an hour, after it had increased by a revised 4 cents an hour in July; at the same time, the average hourly earnings of production and nonsupervisory employees increased by 18 cents to $24.81 an hour, after it had decreased by a revised 10 cents an hour in July...employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.6 hours in August, while hours for production and non-supervisory personnel was unchanged at 34.0 hours...meanwhile, the manufacturing workweek increased by 0.3 hours to 40.0 hours, while average factory overtime rose by a tenth of an hour to 3.0 hours...

At the same time, the seasonally adjusted extrapolation from the August household survey indicated that the number of those who would self-report being employed rose by an estimated 3,756,000 to 147,288,000, while the similarly estimated number of those who would be counted as unemployed fell by 2,788,000 to 13,550,000; which together meant that August saw an increase of 968,000 to 160,838,000 in the total labor force.…since the working age population had grown by 185,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 783,000 to 99,720,000, and that the labor force participation rate increased by 0.3% to 61.7%....at the same time, the jump in number employed vis-a-vis the population was great enough to increase the employment to population ratio, which we could think of as an employment rate, by 1.4% to 56.5%...at the same time, the decrease in the number counted as unemployed was enough to lower the unemployment rate as a percentage of the labor force from 10.2% to 8.4%....meanwhile, the number who reported they were involuntarily working part time fell by 871,000 to 7,572,000 in August, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 16.5% in July to 14.2% in August....

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

July Trade Deficit Up 18.9% to an 11 Year High After 2nd Quarter Deficits Revised Much Higher

Our trade deficit rose by 18.9% in July as the value of both our exports and our imports increased, but the value of our imports increased by almost twice as much....the Commerce Dept report on our international trade in goods and services for July indicated that our seasonally adjusted goods and services trade deficit increased by $10.1 billion to $63.6 billion in July from a revised June deficit of $53.5 billion, which had previously been reported at $50.7 billion...trade figures going back to January were revised with this report, which on net left the 2nd quarter trade deficit $9.6 billion higher than was previously reported, suggesting a large downward revision to 2nd quarter GDP, the magnitude of which depends on the 1st quarter revisions…after rounding, the value of our July exports rose by $12.6 billion, or 8.1 percent, to $168.1 billion on a $12.3 billion increase to $115.5 billion in our exports of goods, and an increase of less than $0.4 billion to $52.6 billion in our exports of services, while our imports rose by $22.7 billion, or 10.9 percent, to $231.7 billion on a $21.5 billion increase to $196.4 billion in our imports of goods and a $1.2 billion increase to $35.3 billion in our imports of services...export prices were on average 0.8% higher in July, so the month's real exports were less than their nominal amount by that percentage, while import prices were 0.7% higher, meaning that our real imports were also smaller than their nominal value by that percentage..

The increase in our July exports included increases in all end use categories, let by greater exports of automotives and parts, consumer goods, industrial supplies and capital goods...referencing the Full Release and Tables for July (pdf), in Exhibit 7 we find that our exports of automotive vehicles, parts, and engines rose by $3,849 million to $12,161 million on a $2,103 million increase in our exports of new and used passenger cars, an $882 million increase in our exports of parts and accessories of vehicles other than engines, chassis, and tires, and a $505 million increase in our exports of trucks, buses, and special purpose vehicles, and that our exports of consumer goods rose by $2,602 million to $14,899 million on a $694 million increase in our exports of gem diamonds and a $648 million increase in our exports of artwork, antiques, and other collectibles....at the same time, our exports of industrial supplies and materials rose by $2,512 million to $35,317 million on a $1,138 million increase in our exports of crude oil, a $446 million increase in our exports of petroleum products other than fuel oil, and a $282 million increase in our exports of fuel oil, and our exports of capital goods rose by $2,473 million to $37,719 million on a $831 million increase in our exports of semiconductors, a $492 million increase in our exports of engines for civilian aircraft, and a $384 million increase in our exports of electric apparatuses...in addition, our exports of foods, feeds and beverages rose by $231 million to $10,185 million on a $196 million increase in our exports of meat and poultry, and our exports of other goods not categorized by end use rose by $641 million to $4,894 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that our imports also rose in all end use categories, and were also led by increased imports of automotives and parts, industrial supplies and materials, capital goods and consumer goods...our imports of automotive vehicles, parts and engines rose by $7,729 million to $26,357 million on a $3,702 million increase in our imports of new and used passenger cars, a $2,482 million increase in our imports of parts and accessories of vehicles other than engines, chassis, and tires, a $697 million increase in our imports of engines and engine parts, and a $589 million increase in our imports of trucks, buses, and special purpose vehicles, and our imports of industrial supplies and materials rose by $4,353 million to $39,758 million on a $1,325 million increase in our imports of finished metal shapes, an $876 million increase in our imports of nonmonetary gold, a $689 million increase in our imports of crude oil, and a $482 million increase in our imports of other precious metals...at the same time, our imports of capital goods rose by $4,069 million to $53,845 million on a $1,691 million increase in our imports of civilian aircraft, a $423 million increase in our imports of electric apparatuses, a $362 million increase in our imports of generators and accessories, and a $280  million increase in our imports of industrial engines, and our imports of consumer goods rose by $3549 million to $54,004 million on an increase of $1694 million in our imports of cellphones, a $794 million increase in our imports of cotton clothing and household goods, a $704 million increase in our imports of furniture, a $554 million increase in our imports of appliances, a $429 million increase in our imports of toys, games, and sporting goods, a $346 million increase in our imports of jewelry, and a $321 million increase in our imports of televisions, which were partly offset by a $1,640 million decrease in our imports of pharmaceuticals....in addition. our imports of foods, feeds, and beverages rose by $395 million to $12,798 million on a $237 million increase in our imports of alcoholic beverages other than bear and wine, and our imports of other goods not categorized by end use rose by $1,373 million to $8,528 million...

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

The July figures show surpluses, in billions of dollars, with South and Central America ($2.9), OPEC ($1.5), Hong Kong ($1.4), Brazil ($0.8), United Kingdom ($0.6), and Saudi Arabia ($0.3). Deficits were recorded, in billions of dollars, with China ($28.3), European Union ($13.1), Mexico ($11.5), Japan ($3.4), Germany ($3.0), Taiwan ($2.8), France ($2.5), India ($2.0), Italy ($1.8), South Korea ($1.5), Singapore ($1.0), and Canada ($0.5). 
  • • The deficit with Mexico increased $2.5 billion to $11.5 billion in July. Exports increased $2.4 billion to $17.8 billion and imports increased $4.9 billion to $29.3 billion. 
  • • The deficit with China increased $1.6 billion to $28.3 billion in July. Exports increased $0.1 billion to $9.5 billion and imports increased $1.7 billion to $37.8 billion. 
  • • The surplus with South and Central America increased $1.2 billion to $2.9 billion in July. Exports increased $1.3 billion to $9.7 billion and imports increased $0.1 billion to $6.8 billion.

To gauge the impact of July trade in goods on 3rd 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 in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, except they are not annualized here....from that table, we can compute that 2nd quarter real exports of goods averaged 113,766 million monthly in 2012 dollars, while inflation adjusted July exports were at 133,728 million in that same 2012 dollar quantity index representation... figuring the annualized change between the two figures, we find that July's real exports of goods are running at a 90.9% annual rate above those of the 2nd quarter, or at a pace that would add about 3.70 percentage points to 3rd quarter's GDP if they were continued through August and September.....in a similar manner, we find that our 2nd quarter real imports averaged 196,062 million monthly in chained 2012 dollars, while the similarly inflation adjusted July imports were at 224,215 million...that would indicate that so far in the 3rd quarter, our real imports have grown at annual rate of roughly 71.0% from those of the 2nd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 71.0% rate would subtract about 5.66 percentage points from 3rd quarter GDP....hence, if the July trade deficit is maintained throughout the 3rd quarter, our deteriorating balance of trade in goods over that of the 2nd quarter would subtract about 1.96 percentage points from the growth of 3rd quarter GDP....note, however, that we have not even computed the impact of the less volatile change in services here because the BEA does not provide inflation adjusted data on those, and we don't have an easy way to adjust for all their price changes...

Construction Spending Rose 0.1% in July after 2nd Quarter Spending was Revised Higher

The Census Bureau report on construction spending for July (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,364.6 billion annually if extrapolated over an entire year, which was more than 0.1 percent (±1.2 percent)* above the revised annualized estimate of $1,362.8 billion of construction spending in June but 0.1 percent (±1.6 percent)* below the estimated annualized level of construction spending in July of last year....the June construction spending estimate was revised nearly 0.6% higher, from $1,355.2 billion to $1,362.8 billion, while the annual rate of construction spending for May was revised more than 0.3% higher, from $1,364.7 billion to $1,369,363 billion....on net, those revisions would suggest a upward revision of 0.10 percentage points to 2nd quarter GDP when the third estimate is released at the end of September, assuming the net impacts from the inflation adjustments are similar to those we saw in the 2nd estimate...

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 $1,013.5 billion, 0.6 percent (±0.5 percent) above the revised June estimate of $1,007.2 billion. Residential construction was at a seasonally adjusted annual rate of $546.6 billion in July, 2.1 percent (±1.3 percent) above the revised June estimate of $535.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $466.9 billion in July, 1.0 percent (±0.5 percent) below the revised June estimate of $471.6 billion.
  • Public Construction: In July, the estimated seasonally adjusted annual rate of public construction spending was $351.1 billion, 1.3 percent (±2.0 percent)* below the revised June estimate of $355.6 billion. Educational construction was at a seasonally adjusted annual rate of $82.2 billion, 3.0 percent (±1.8 percent) below the revised June estimate of $84.7 billion. Highway construction was at a seasonally adjusted annual rate of $99.0 billion, 3.1 percent (±5.9 percent)* below the revised June estimate of $102.1 billion.

Construction spending inputs 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 July spending reported in this release on 3rd 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…the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for each of the various components of non-residential investment, so in lieu of trying to adjust for all of those different price indices, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an approximate estimate...

That price index showed that aggregate construction costs were up 0.6% in July, after falling 0.3% in June and falling 0.1% from April to May...on that basis, we can estimate that July construction costs were roughly 0.3% more than those of May and  0.2% more than those of April, and obviously 0.6% more than those of June...we then use those percentages to inflate the lower priced spending figures for each of those months, which is arithmetically the same as deflating July construction spending, for comparison purposes...annualized construction spending in millions of dollars for the second quarter is given as 1,362,823 for June, 1,369,363 for May, and 1,387,936 for April, while it was at 1,364,565 million in July ...thus to compare July's inflation adjusted construction spending to that of the first quarter, our arithmetic formula becomes: 1,364,565 / (((1,362,823 * 1.006) + (1,369,363 *1.003) + (1,387,936 * 1.002)) / 3) = 0.989967, meaning real construction spending in July was down 1.0% vis a vis the 2nd quarter, or down at a 4.0% annual rate...to figure the effect of that change on GDP,  we take the difference between the second quarter spending average and that of July and take that result as a fraction of 2nd quarter GDP, and find that aggregate July construction spending is falling at a rate that would subtract approximately 0.34 percentage points from 3rd quarter GDP should we see no improvement from July's adjusted figures in August or September…

Factory Shipments Up 4.6% in July, Factory Inventories Down 0.5%

The July Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $27.8 billion or 6.4 percent to $466.1 billion in July, following an increase of 6.4% to $438.2 billion in June, which was revised from the 6.2% increase to $437.2 billion reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the July advance report on durable goods we reported on last week...on those revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we'll just quote directly from that here:

  • Summary: New orders for manufactured goods in July, up three consecutive months, increased $27.8 billion or 6.4 percent to $466.1 billion, the U.S. Census Bureau reported today. This followed a 6.4 percent June increase. Shipments, also up three consecutive months, increased $21.3 billion or 4.6 percent to $479.5 billion. This followed a 10.0 percent June increase. Unfilled orders, down four of the last five months, decreased $8.3 billion or 0.8 percent to $1,084.3 billion. This followed a 1.4 percent June decrease. The unfilled orders-to-shipments ratio was 6.70, down from 7.01 in June. Inventories, down following two consecutive monthly increases, decreased $3.1 billion or 0.5 percent to $687.2 billion. This followed a 0.5 percent June increase. The inventories-to-shipments ratio was 1.43, down from 1.51 in June.
  • New orders for manufactured durable goods in July, up three consecutive months, increased $23.7 billion or 11.4 percent to $231.1 billion, up from the previously published 11.2 percent increase. This followed a 7.7 percent June increase. Transportation equipment, also up three consecutive months, led the increase, $19.6 billion or 35.7 percent to $74.7 billion. New orders for manufactured nondurable goods increased $4.2 billion or 1.8 percent to $235.0 billion.
  • Shipments of manufactured durable goods in July, up three consecutive months, increased $17.1 billion or 7.5 percent to $244.6 billion, up from the previously published 7.3 percent increase. This followed a 15.2 percent June increase. Transportation equipment, also up three consecutive months, led the increase, $12.7 billion or 17.9 percent to $83.2 billion. Shipments of manufactured nondurable goods, up three consecutive months, increased $4.2 billion or 1.8 percent to $235.0 billion. This followed a 5.3 percent June increase. Petroleum and coal products, also up three consecutive months, led the increase, $2.3 billion or 6.5 percent to $38.3 billion.
  • Unfilled orders for manufactured durable goods in July, down four of the last five months, decreased $8.3 billion or 0.8 percent to $1,084.3 billion, unchanged from the previously published decrease. This followed a 1.4 percent June decrease. Transportation equipment, down five consecutive months, drove the decrease, $8.5 billion or 1.1 percent to $735.0 billion.
  • Inventories of manufactured durable goods in July, down two consecutive months, decreased $2.7 billion or 0.6 percent to $421.8 billion, down from the previously published 0.5 percent decrease. This followed a 0.1 percent June decrease. Fabricated metal products, also down two consecutive months, led the decrease, $0.9 billion or 1.6 percent to $51.7 billion. Inventories of manufactured nondurable goods, down following two consecutive monthly increases, decreased $0.5 billion or 0.2 percent to $265.4 billion. This followed a 1.4 percent June increase. Chemical products, down two of the last three months, led the decrease, $0.2 billion or 0.2 percent to $96.4 billion.

To estimate the effect of those July factory inventories on 3rd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories decreased by 0.6% to $244,324 million; the value of work in process inventories fell 0.4% to $205,699 million, and materials and supplies inventories were valued 0.4% lower at $237,193 million.…meanwhile, the July producer price index reported that prices for finished goods were on average 0.8% higher, that prices for intermediate processed goods were on average 1.5% higher, while prices for unprocessed goods were 0.7% lower....assuming similar valuations for like types of inventories, that would suggest that July's real finished goods inventories were about 1.4% lower, that real inventories of intermediate processed goods about 1.9% lower, and real raw material inventory inventories were about 0.3% higher...since real NIPA factory inventories were a bit higher in the 2nd quarter, the fact that this report appears to indicate a real decrease in aggregate July factory inventories would therefore have a corresponding negative impact on the growth rate of 3rd quarter GDP....however, with total business inventories down sharply in the 2nd quarter, the negative impact of falling factory inventories is likely to be offset by less severe contraction, or even growth of inventories at the retail and wholesale levels...

 

(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…)