Sunday, November 29, 2020

3rd quarter GDP revision, October’s income and outlays, durable goods, and new home sales

The key economic reports released this week were the 2nd estimate of 3rd quarter GDP and the October report on Personal Income and Spending, both from the Bureau of Economic Analysis; other widely watched releases included the Advance Report on Durable Goods for October and the October report on new home sales, both from the Census bureau, and the Case-Shiller Home Price Index for September from S&P Case-Shiller, an index generated by averaging relative home sales prices from July, August and September of this year against a January 2000 home-price baseline…Case-Shiller reported that home prices nationally for those 3 months averaged 7.0% higher than prices for the same homes that sold during the same 3 month period a year earlier, up from the 5.7% year over year index increase shown in the prior report...

The week also saw the release of the Chicago Fed National Activity Index (CFNAI) for October, a weighted composite index of 85 different economic metrics, which rose to +0.83 in October from +0.32 in September, which was revised from the +0.27 reading of last month....however, the 3 month average of the CFNAI fell to fell to +0.75 in October, down from a revised +1.37 in September, which still indicates that national economic activity has been above the historical trend over those recent months, as would any positive number....in addition; the Richmond Fed Survey of Manufacturing Activity for November, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index fell to +15 in November, down from +29 in October, but still suggesting an ongoing modest expansion of that region's manufacturing...

Second Estimate Indicates 3rd Quarter GDP Grew at a 33.1% Rate

The Second Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 33.1% rate in the quarter, revised but unchanged from the 33.1% growth rate reported in the advance estimate a month ago, as fixed investment and exports grew more than was previously estimated, while personal consumption grew by less than was previously reported, government shrunk by more that was estimated, and imports, which subtract from GDP, were revised higher.....in current dollars, our third quarter GDP grew at a 38.01% annual rate, increasing from what would work out to be a $19,520.1 billion a year output rate in the 2nd quarter to a $21,157.1 billion annual rate in the 3rd quarter, with the headline 33.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 3.6%, aka the GDP deflator, was computed and applied to the current dollar change of each of the GDP components....

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

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 40.7% rate reported a month ago to a 40.6% rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 45.89% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated inflation of goods and services grew at a 3.7% annual rate in the 3rd quarter, which was unrevised from the PCE inflation rate reported a month ago...real consumption of durable goods grew at a 82.9% annual rate, which was revised from the 82.2% growth rate shown in the advance report, and added 5.20 percentage points to GDP, as real consumption of durable goods other than autos, furniture and recreational goods and vehicles grew at a 265% annual rate and accounted for over a quarter of the durable goods increase....real consumption of nondurable goods by individuals grew at a 30.6% annual rate, revised from the 28.8% growth rate reported in the 1st estimate, and added 4.29 percentage points to the 3rd quarter’s economic growth rate, as real growth in consumption of clothing and footwear at a 180.5% rate accounted for around 45% of the growth in non-durables....at the same time, consumption of services rose at a 37.6% annual rate, revised from the 38.8% growth rate reported last month, and added 15.73 percentage points to the final GDP tally, as real health care services grew at a 96.6% rate and accounted for more than half of the quarter’s growth in services...

Meanwhile, seasonally adjusted real gross private domestic investment grew at a 84.9% annual rate in the 3rd quarter, revised from the initial 83.0% growth estimate reported last month, as real private fixed investment grew at a 30.4% rate, revised from the 28.5% growth rate reported in the advance estimate, while inventory growth was a bit smaller than previously estimated...investment in non-residential structures was revised to show contraction at a 15.8% rate, worse than the 14.6% contraction rate previously reported, while real investment in equipment grew at a 66.6% rate, revised down from the 70.1% rate reported last month....on the other hand, the quarter's investment in intellectual property products was revised from contraction at a 1.0% rate to growth at a 6.0% rate, while at the same time real residential investment was shown to be growing at a 62.3% annual rate, revised from the 59.3% rate shown in the previous report…after those revisions, the decrease in investment in non-residential structures subtracted 0.47 percentage points from the 3rd quarter's growth rate, while the increase in investment in equipment added 3.19 percentage points to the quarter's growth rate, growth in investment in intellectual property added 0.34 percentage points to the growth rate of 3rd quarter GDP and growth in residential investment added 2.17 percentage points to the growth of GDP...

In addition, investment in real private inventories shrunk by an inflation adjusted $4.3 billion in the 3rd quarter, revised from the originally reported $1.0 billion of real inventory shrinkage...this came after inventories had shrunk at an inflation adjusted $287.0 billion rate in the 2nd quarter, and hence the rounded $282.7 billion quarter over quarter improvement in real inventory growth added 6.55 percentage points to GDP, revised from the 6.62 percentage point addition to GDP due to lower inventory growth that was indicated in the advance estimate.... however, since growth in inventories indicates that more of the goods produced during the quarter were left in warehouses or "sitting on the shelf”, their quarter over quarter increase at a $282.7 billion rate meant that growth of real final sales of GDP was relatively smaller by that much, and hence real final sales of GDP rose at a 25.6% rate in the 3rd quarter, a reversal of the real final sales shrinkage rate of 28.1% in the 2nd quarter, when the decrease in inventory growth meant that the drop in real final sales was that much less than the real decrease in GDP...

The previously reported increase in real exports was revised a bit higher with this estimate, but the previously reported increase in real imports was revised upwards by more, and as a result the change in our net trade was a greater subtraction from GDP than was previously reported...our real exports grew at a 60.5% rate rather than the 59.7% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, that growth added 4.95 percentage points to the 3rd quarter's growth rate, revised from the 4.90 percentage point addition shown in the previous report....meanwhile, the previously reported 91.1% increase in our real imports was revised to a 93.1% increase, and since imports are subtracted from GDP because they represent either consumption or investment added to an other GDP component that was not produced here, their increase subtracted 8.12 percentage points from 3rd quarter GDP, rather than the 7.99 percentage point subtraction shown last month....thus, our deteriorating trade balance subtracted a net of 3.18 percentage points from 3rd quarter GDP, rather than the 3.09 percentage point subtraction that had been indicated by the advance estimate..

Finally, the entire government sector shrank at a 4.9% rate, revised from the 4.5% shrinkage rate previously reported, as federal government consumption and investment was little changed from the initial estimate, while real state & local government consumption and investment shrank by more than had been previously indicated....real federal government consumption and investment was seen to have shrunk at a 6.2% rate from the 2nd quarter in this estimate, statistically unchanged from the shrinkage rate shown in the advance estimate, as real federal outlays for defense grew at a 3.1% rate, revised from the 3.0% growth reported last month, and added 0.17 percentage points to 3rd quarter GDP, while all other federal consumption and investment shrank at an 18.1% rate, unrevised from the advance estimate, and subtracted 0.55 percentage points from 3rd quarter GDP....meanwhile, real state and local consumption and investment shrank at a 4.0% rate in the quarter, which was revised from the 3.3% shrinkage rate reported in the 1st estimate, and subtracted 0.38 more percentage points from 3rd quarter GDP, as a decrease in real state and local investment contributed 0.10 percentage points to the decrease...note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services...

Personal Income Decreased 0.7% in October, Personal Spending Rose 0.5%, PCE Price Index Unchanged

The October report on Personal Income and Outlays from the Bureau of Economic Analysis includes the month's data for our personal consumption expenditures (PCE), which accounts almost 70% of the month's GDP, and with it the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated...in addition, this release reports our personal income data, disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics is not the current monthly change; rather, they're seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much income and spending would change over a year if October's change in seasonally adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from September to October....

Thus, when the opening line of the news release for this report tell us "Personal income decreased $130.1 billion (0.7 percent) in October", they mean that the annualized figure for seasonally adjusted personal income in October, $19,725.9 billion, was $130.1 billion, or less than 0.7% lower than the annualized personal income figure of $19,855.9 billion extrapolated for September; the actual, unadjusted change in personal income from September to October is not given...at the same time, annualized disposable personal income, which is income after taxes, fell by nearly 0.8%, from an annual rate of $17,649.9 billion in September to an annual rate of $17,515.2 billion in October...the monthly contributors to the change in personal income, which can be viewed in detail in the Full Release & Tables (PDF) for this release, are also annualized...in October, there was $103.1 billion annual rate of decrease in personal income because the $70.4  billion annual rate of increase in income from wages and salaries was more than offset by a $252.6 billion annual rate of decrease in personal current transfer receipts from government programs…

For the personal consumption expenditures (PCE) that we're most interested in, BEA reports that they increased at a $70.9 billion rate, or by almost 0.5%, as the annual rate of PCE rose from $14,569.6 billion in September to $14,640.5 billion in October....September PCE was revised from $14,578.4 billion annually to $14,569.6 billion, a revision that was already incorporated into the 2nd estimate of 3rd quarter GDP which we just reviewed (this report, although usually released a business day later than the GDP release, is computed concurrently)....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $67.5 billion to $15,135.4 billion annually in October, which left total personal savings, which is disposable personal income less total outlays, at a $2,379.8 billion annual rate in October, down from the revised $2,582.1 billion annualized personal savings in September... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 13.6% in October from the revised September savings rate of 14.6%, the lowest personal savings rate since March, but still up from the personal savings rate of 7.2% in October a year ago....

As you know, before personal consumption expenditures are used in the computation of GDP, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....that's done with the price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is included in Table 9 in the pdf for this report...that index was at 111.684 in October, unchanged from September, which the BEA reports as 0.0% in the press release...note that when the PCE price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in those chained 2012 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to that of another....that result is shown in table 7 of the PDF, where we see that October's chained dollar consumption total works out to 13,108.9 billion annually, 0.48599% more than September's 13,045.5 billion, a difference that the BEA reports as +0.5%...

However, to estimate the impact of the change in October PCE on the change in GDP, the month over month change in PCE doesn't help us much, since GDP is reported quarterly...thus we have to compare October's real PCE to the real PCE of the 3 months of the third quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the quarterly annualized chained dollar PCE for those three months in table 8 of the pdf for this report, where we find that the annualized real PCE for the 3rd quarter was represented by 12,915.9 billion in chained 2012 dollars...(note that's the same as what's shown in table 3 of the pdf for the 3rd quarter GDP report)....when we compare October's real PCE representation of 13,108.9 billion to the 3rd quarter real PCE figure of 12,915.9 billion, we find that October's real PCE has grown at a 6.112% annual rate from that of the 3rd quarter....that would mean that even if October real PCE does not improve during November and December, growth in PCE would still add 4.25 percentage points to the GDP growth rate of the 4th quarter...

October Durable Goods: New Orders Up 1.3%, Shipments Up 1.3%, Inventories Up 0.3%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for October (pdf) from the Census Bureau reported that the value of the widely followed new orders for manufactured durable goods increased by $3.0 billion or 1.3 percent to $240.8 billion in October, after September's new orders were revised from the $237.1 billion reported last month to $237.8 billion, now shown as a 2.1% increase from August, rather than the 1.9% increase previously reported....however, year to date new orders are still 9.1% below those of 2019, albeit up from the 10.1% year over year decrease we saw in this report last month....

A $2.4 billion or a 23.1% jump to $12.7 billion in new orders for defense capital goods led the increase, while the volatile monthly change in new orders for transportation equipment rose $0.9 billion or 1.2 percent to $77.1 billion, as a 79.1% increase to $2,957 million in new orders for military aircraft and a 38.8% increase to $2,645 million in new orders for commercial aircraft more than offset a 3.2% decrease to $60,109 million in new orders for motor vehicles and parts....excluding orders for transportation equipment, other new orders rose 1.3%, while excluding just new orders for defense equipment, new orders rose 0.2%....meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, rose by $515 million or 0.7% to $70,025 million...

At the same time, the seasonally adjusted value of October shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for any changes in prices, increased by $3.1 billion or 1.3 percent to $248.7 billion, the fifth increase in 6 months, after September shipments were revised from $245.0 billion to $245.6 billion, now up 0.5% from August...a $0.7 billion or 2.4 percent increase to $30.9 billion in shipments of fabricated metal products, also up five of the last six months, led the increase, while shipments of transportation equipment were a drag on the October total, being down $0.1 billion or 0.2 percent to $81.7 billion, leaving shipments of all other durable goods shipments with a 2.0% increase...of those, shipments of nondefense capital goods less aircraft rose 2.3% to $69,380 million, after September capital goods shipments were revised from $67,493 million to $67,800, now a 0.7% increase..

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 2nd month in a row, increasing by $1.3 billion or 0.3 percent to $422.8 billion, after August inventories were revised from $422.1 billion to $421.5 billion, now 0.3% higher than the prior month...an increase in inventories of transportation equipment led the October inventory increase, as they rose $0.6 billion or 0.4 percent to $148.2 billion, while the value of inventories other than those of transportation equipment rose 0.2% to $274.6 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 seventh time in eight months, decreasing by $2.8 billion or 0.3 percent to $1,073.2 billion, after September’s unfilled orders were revised from $1,075.7 billion to $1,075.9 billion, still a 0.2% decrease from August....a $4.6 billion or 0.6 percent decrease to $717.0 billion in unfilled orders for transportation equipment drove the October decrease, while unfilled orders excluding transportation equipment orders were up 0.5% to $356.2 billion...compared to a year earlier, the unfilled order book for durable goods is 6.7% below the level of last October, with unfilled orders for transportation equipment 10.3% below their year ago level, on a 15.9% decrease in the backlog of orders for commercial aircraft and a 4.9% decrease in the backlog of new orders for military aircraft.... 

New Home Sales Little Changed in October After September Sales Revised to a 14 Year High

The Census report on New Residential Sales for October (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 999,000 homes annually, which was 0.3 percent (±13.6 percent)* below the revised September rate of 1,002,000 new single family home sales annually, but 41.5 percent (±22.6 percent) above above the estimated annual rate that new homes were selling at in October of last year....the asterisk indicates that based on their small sampling, Census could not be certain whether October new home sales rose or fell from those of September, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the  largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales of new single family homes in September were revised from the annual rate of 959,000 reported last month up to what is now a post recession high 1,002,000 annual rate, while home sales in August, initially reported at an annual rate of 1,011,000 and revised down to a 994,000 a year rate last month, were revised to a 1,001,000 a year rate with this report, and while July's home sale rate, initially reported at an annual rate of 901,000 three months ago and unrevised at a 965,000 a year rate last month, were revised up to a 979,000 annual 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 80,000 new single family homes sold in October, up from the 79,000 estimated new homes that sold in September and up from the 55,000 homes that sold in October a year ago.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in October was $330,600, down from the median sale price of $331,600 in September but up from the median home sales price of $322,400 in October a year ago, while the average new home sales price in October was $386,200, down from the $403,900 average sales price in September, but up from the average sales price of $380,300 in October a year ago....a seasonally adjusted estimate of 278,000 new single family houses remained for sale at the end of October, which represents a 3.3 month supply at the October sales rate, same as the revised 3.3 months of new home supply in September...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales at 999,000 Annual Rate in October and A few Comments on October New 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, November 22, 2020

October’s retail sales, industrial production, new housing starts and existing home sales; September’s business inventories..

Major reports released this week included Retail Sales Report for October and the associated Business Sales and Inventories Report for September, both from the Census Bureau, the October report on Industrial Production and Capacity Utilization from the Fed, the October report on New Residential Construction from the Census bureau, the Existing Home Sales Report for October from the National Association of Realtors (NAR), and the October Import-Export Price Index from the Bureau of Labor Statistics (BLS)...in addition, the BLS also released the Regional and State Employment and Unemployment for October, a report which breaks down the two employment surveys from the monthly national jobs report by state and region....while the text of that report provides a useful summary of this data, the serious 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 three regional Fed manufacturing survey for November: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, a suburban NYC county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +10.5 in October to +6.3 in November, suggesting that First District manufacturing is recovering at a slower pace than a month ago; the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions was also lower, falling from a reading of +32.3 in October to +26.3 in November, but still suggesting an ongoing strong rebound of that region's manufacturing; and the Kansas City Fed manufacturing survey, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index was at +11 in November, down from +13 in October but unchanged from +11 in September, suggesting continued of modest growth of that region's manufacturing...

Retail Sales Rose 0.3% in October after August & September Sales Were Revised Much Higher

Seasonally adjusted retail sales increased 0.3% in October after retail sales for August and September were revised higher...the Advance Retail Sales Report for October (pdf) from the Census Bureau estimated that seasonally adjusted retail and food services sales totaled $553.3 billion nationally during the month, which was 0.3 percent (±0.5%)* higher than September's revised sales of $551.9 billion and 5.7 percent (±0.7 percent) above the adjusted sales in October of last year... September's seasonally adjusted sales were revised from the $549.3 billion reported last month to $551.9 billion, while August's sales were revised from $539.0 billion to $543.4 billion, and those upward revisions managed to cause the August to September percent increase to slip from up 1.9 percent (±0.5 percent) to up 1.6 percent (±0.3 percent)....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 4.3%, from $534,013 million in September to $557,149 million in October, while they were up 6.0% from the $525,539 million of sales in October a year ago...the combined total $7.0 billion upward revision to August and September's retail sales would indicate an upward revision of over $28 billion at an annual rate in 3rd quarter sales, and should increase the previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.52 percentage points, assuming the distribution of price adjustments in the revised figures is similar to that of those originally published...

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

October 2020 retail sales table

To compute October's real personal consumption of goods data for national accounts from this October retail sales report, the BEA will use the corresponding price changes for each type of sales from the October 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 October retail sales excluding the 0.4% increase in sales at gas stations were up by 0.2%....then, subtracting the figures representing the 0.2% decrease in grocery & beverage sales and the 0.1% decrease in food services sales from that total, we find that core retail sales were up by nearly 0.4% for the month....since the CPI report showed that the composite price index for all goods less food and energy goods was down 0.2% in October, we can thus approximate that real retail sales excluding food and energy were on average almost 0.6% higher for the month...however, the actual adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at clothing stores were 4.2% lower in October, the apparel price index was 1.2% lower, which means that real sales of clothing were actually down around 3.0%....similarly, while sales at furniture stores were down 0.4%, the price index for household furnishings and supplies decreased by 0.5%, which would suggest that real sales at furniture stores actually rose 0.1%…on the other hand, while nominal sales at vehicle and parts dealers rose 0.4%, the price index for transportation commodities other than fuel rose 0.2%, so real sales of recreational goods were only roughly 0.2% higher...

In addition to figuring those core retail sales, to make a complete estimate of real October PCE, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do....the CPI report showed that the food price index was 0.2% higher in October, with the price index for food purchased for use at home 0.1% higher, while prices for food bought to eat away from home were 0.3% higher... hence, with nominal sales at food and beverage stores 0.2% lower, real sales of food and beverages would be roughly 0.3% lower in light of the 0.1% higher prices…likewise, the 0.1% decrease in nominal sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests that real sales at bars and restaurants fell 0.4%...meanwhile, while nominal sales at gas stations were up 0.4%, there was a 0.5% decrease in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 0.9%, with the caveat that gasoline stations do sell more than gasoline, and we aren’t accounting for those other sales...by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food service sales, we can estimate that the income and outlays report for October will show that real personal consumption of goods rose by around 0.6% for the month, after rising by a revised 1.9% in September, and by a revised 0.6% in August....at the same time, the 0.4% decrease in real sales at bars and restaurants will have a small negative impact on October's real personal consumption of services..

Industrial Production Rose 1.1% in October after Prior Months Revised Higher

The Fed's G17 release on Industrial production and Capacity Utilization reported that industrial production rose by 1.1% in October after falling by a revised 0.4% in September and rising by a revised 0.7% in August….the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 103.2 in October from 102.1 in September, which was revised from the 101.5 index level reported last month...at the same time, the August index was revised from 102.2 to 102.5 and the May index was revised from 91.9 to 92.1, while the index readings for June and July remained unchanged at 97.6 and 101.7 respectively...after revisions, industrial production is still 5.3% lower than a year ago, and 5.6% lower than its pre-pandemic high in February ...

The manufacturing index, which accounts for more than 75% of the total IP index, increased by 1.0%, from 98.9 in September to 99.9, after September's manufacturing index was revised up from 98.3 to 98.9, August's manufacturing index was revised up from 98.3 to 98.9, July's index remained unchanged at 97.4, June's index remained unchanged at 93.5, and May's manufacturing index was revised up from 86.9 to 87.0....the manufacturing index is still 3.9% below its level of a year ago... meanwhile, the mining index, which includes oil and gas well drilling, fell by 0.6%, from 114.9 in September to 114.2 in October, after the September mining index was revised up from 113.9, and the August index was revised from 112.0 to 113.5, which still left the mining index 14.4% lower than it was a year ago....meanwhile, the utility index, which often fluctuates due to above or below normal temperatures, jumped by 3.9% in October, from 99.4 to 103.3, after the September utility index was revised from 99.6 to 99.4, still leaving the utility index 3.0% lower than it was a year earlier..

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose to 72.8% in October from 72.0% in September, after September's utilization was revised up from the 71.5% that was reported for September a month ago...capacity utilization of NAICS durable goods production facilities rose from 70.1% in September to 70.8% in October, after September's figure was revised up from 69.4%, while capacity utilization for non-durables producers rose from 73.0% in September to 73.9% in October, after September's nondurables utilization was revised up from 72.9%...capacity utilization for the mining sector fell to 77.9% in October from 78.2% in September, which was originally reported as 77.6%, while utilities were operating at 72.7% of capacity during October, up from their 70.2% of capacity during September, which was revised from the previously reported 70.4%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories.... 

Business Sales Up 0.6% in September, Business Inventories Up 0.7%

After the release of the October retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for September (pdf), which incorporates the revised September retail data from that October report and the earlier published September wholesale and factory data to give us a complete picture of businesses’ impact on 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 $1,465.1 billion in September, up 0.6 percent (±0.1 percent) from August's revised sales, and up 0.8 percent (±0.4 percent) from September sales of a year earlier...note that total August sales were concurrently revised up from the originally reported $1,452.4 billion to $1,455.958 billion, and are now up 0.9% from July....seasonally adjusted manufacturer's sales were up 0.3% to $482,818 million in September, and retail trade sales, which exclude restaurant & bar sales from the revised September retail sales that we reported earlier, rose 1.5% to $496,230 million, while wholesale sales rose 0.1% to $486,039 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,932.8 billion at the end of September, up 0.7 percent (±0.1 percent) from August, but 4.7 percent (±0.3 percent) lower than in September a year earlier...the value of end of August inventories were revised from the $1,919.2 billion reported last month to $1,919.9 billion, but are still up 0.3% from July....seasonally adjusted inventories of manufacturers were estimated to be valued at $686,652 million, statistically unchanged from August, inventories of retailers were valued at $607,675 million, 1.7% more than in August, while inventories of wholesalers were estimated to be valued at $638,488 million at the end of September, 0.4% higher than in August...

We had previously estimated that 3rd quarter GDP was underestimated by around 0.34 percentage points based on what the wholesale inventory report showed, but that 3rd quarter GDP was overestimated by around 0.19 percentage points based on what the factory inventories report showed....in the advance report on 3rd quarter GDP of three weeks ago, retail inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release...that report estimated that our seasonally adjusted retail inventories were valued at $606,958 million at the end of September, up 1.6% from a revised $597,477 million valuation in August....that's $0.717 billion less than the $607,675 million for the end of the quarter that this report shows, which would mean that the quarterly change in 3rd quarter retail inventories was underestimated at roughly a $2.9 billion annual rate, meaning 3rd quarter GDP would be revised 0.06 percentage points higher based on the revision to retail inventories...combined with our previous figures on factory and wholesale inventories, then, this report would suggest that the growth rate of 3rd quarter GDP should be revised upwards by around 0.21 percentage points when the 2nd estimate is released at the end of November...

Housing Starts Reported Higher in October; Building Permits Unchanged

The October report on New Residential Construction(pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,530,000 units during the month, which was 4.9 percent (±11.1 percent)* above the revised September estimated annual rate of 1,459,000 housing unit starts, and was 14.2 percent (±8.8 percent) above last October's pace of 1,340,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell from September, with the figures in parenthesis the most likely range of the change indicated; in other words, in other words, October's housing starts could have been down by 6.2% or up by as much as 16.0% from those of September, with even larger revisions possible after a number of months...with this report, the annual rate for September housing starts was revised from the 1,415,000 reported last month up to 1,459,000, while the annual rate for August’s housing starts, which was revised from 1,416,000 to 1,388,000 last month, was revised down to 1,373,000 with this report...

Those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 132,000 housing units were started in October, up from the 128,800 units that were started in September...of those housing units started in October, an estimated 101,000 were single family homes and 29,600 were units in structures with more than 5 units, up from the revised 96,300 single family starts in September, but down from the 32,000 units started in structures with more than 5 units in September...

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 October, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,545,000 housing units, which was unchanged (±1.3 percent)* the September rate of 1,545,000 permits, but was 2.8 percent (±1.6 percent) above the rate of building permit issuance in October a year earlier.…at the same time, the annual rate for housing permits issued in September was revised lower, from 1,553,000 to 1,545,000....

Again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates provided monthly by canvassing census agents, which indicated that permits for 133,000 housing units were issued in October, down from the revised estimate of 133,300 new permits issued in September...the October permits included 94,500 permits for single family homes, down from 94,700 single family permits issued in September, and 33,100 permits for housing units in apartment buildings with 5 or more units, down from 34,700 such multifamily permits a month earlier...

For graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.530 Million Annual Rate in October and Comments on October Housing Starts...

Existing Home Sales Rose 4.3% to a 14 Year High in October

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 4.3% from September to October, projecting that a 14 year high of 6.54 million existing homes would sell over an entire year if the October home sales pace were extrapolated over that year, a pace that was also 26.6% above the 5.41 million annual sales rate projected in October of a year ago...September sales, now indicated at a 6.57 million annual rate, were revised up from the 6.54 million annual sales rate indicated by last month's report....the NAR also reported that the median sales price for all existing-home types was $313,000 in October, almost 16% higher than in October a year earlier, which they say "marks 104 straight months of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Jump 4.3% to 6.85 Million in October", 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 of the actual number of homes that sold each month...this unadjusted data indicates that roughly 573,000 homes sold in October, up by 1.8% from the 563,000 homes that sold in September, and up by 24.0% from the 462,000 homes that sold in October of last year, so we can see there was a small boost from the seasonal adjustment on this month’s annualized published figures.....that same pdf indicates that the median home selling price for all housing types rose by half a percent, from a revised $311,400 in September to $313,000 in October, while the average home sales price was at $345,100, up a bit from the $343,100 average sales price in September, and up 12.3% from the $307,300 average home sales price of October a year ago...regionally, average home sales prices ranged from a low of $272,500 in the Midwest to a high of $456,600 in the West, with only the West showing a decrease in the average sales price for the month...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 6.85 million in October and Comments on October 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, November 15, 2020

October's consumer price and producer price indexes, September's job openings and labor turnover

The major reports released this past week were the October Consumer Price Index, the October Producer Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) for September, all from the Bureau of Labor Statistics...

CPI Unchanged in October as Higher Rents and Airfares Offset Lower Prices for Clothing and Gasoline

The consumer price index was unchanged in October, as higher prices for housing, new vehicles, airline fares, and restaurant meals were offset by lower prices for clothing, gasoline, household furnishings, and medical services...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that average seasonally adjusted prices were unchanged in October after rising by by 0.2% in September, 0.4% in August, by 0.6% in July and by 0.6% in June, after falling by 0.1% in May, falling by 0.8% in April and by 0.4% in March, but after rising by 0.1% in February, by 0.1% in January, by 0.2% in December, 0.2% in November, and rising by 0.2% last October....the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 260.280 in September to 260.388 in October, which left it statistically 1.182% higher than the 257.346 reading of October of last year, which is reported as a 1.2% year over year increase, down from the 1.3% year over year increase reported a month ago....with higher prices for food services offset by lower prices for fuels, seasonally adjusted core prices, which exclude food and energy, were also unchanged for the month, as the unadjusted core price index rose from 269.054 to 269.328, which left the core index 1.6106% ahead of its year ago reading of 265.059, which is reported as a 1.6% year over year increase, down from the 1.7% the year over year core price increase that was reported for September...

The volatile seasonally adjusted energy price index rose 0.1% in October, after rising 0.8% in September, 0.9% in August, 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% last October, and is still 9.2% lower than in October a year ago...the price index for energy commodities was 0.5% lower in October, while the index for energy services was 0.8% higher, after rising 1.6% in September....the energy commodity index was down 0.5% on a 0.5% decrease in the price of gasoline and a 0.3% decrease in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.9% higher...within energy services, the price index for utility gas service fell 0.7% after rising 4.2% in September and is still 1.8% higher than it was a year ago, while the electricity price index rose 1.2% after rising 0.9% in September....energy commodities are averaging 18.1% lower than their year ago levels, with gasoline prices averaging 18.0% lower than they were a year ago, while the energy services price index is now up 1.4% from last October, as electricity prices are also 1.3% higher than a year ago…

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

In the food at home categories, the price index for cereals and bakery products was 0.3% higher as average bread prices rose 0.7%, the price index for fresh sweetrolls, coffeecakes, and doughnuts rose 1.5%, the price index for cookies rose 2.1%, and the price index for flour and prepared flour mixes rose 1.1%....at the same time, the price index for the meats, poultry, fish, and eggs group was 0.4% higher as the price index for beef and veal rose 0.7%, egg prices rose 1.5%, and the price index for pork was 1.3% higher...on the other hand, the seasonally adjusted index for dairy products was 0.9% lower, as milk prices fell 2.5% and the index for ice cream and related products was 1.9% lower....meanwhile, the fruits and vegetables index was 0.1% higher as the price index for fresh fruits rose 0.2% on a 3.0% increase in apple prices and the price index for fresh vegetables rose 0.2% on a 7.2% increase in lettuce prices...at the same time, the beverages price index was 0.1% lower as the price index for noncarbonated juices and drinks fell 0.6% and the price index for beverage materials including tea fell 1.2%....lastly, the price index for the ‘other foods at home’ category was 0.3% higher, as peanut butter prices rose 3.4%, the price index for salt and other seasonings and spices rose 1.1%, and the price index for sugar and sugar substitutes rose 2.8%...the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last September, the price index for uncooked beef roasts has risen 11.9%, the price index for pork roasts, steaks, and ribs is up 10.4%, the price index for poultry other than chicken is 11.3% higher, the price index for frankfurters is up 10.4% over the year, lettuce prices have risen 10.5%, tomato prices have risen 10.3%, while the 3.2% decrease in apple prices is the largest drop of the few food prices that have declined over the past year...

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

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust September's retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.5% lower, as the price index for furniture and bedding fell 0.4%, the price index for window and floor coverings fell 1.5%, and the price index for dishes and flatware decreased by 4.1%....at the same time, the apparel price index was 1.2% lower on a 6.3% decrease in the price index for men's suits, sport coats, and outerwear, a 2.9% decrease in the price index for men's shirts and sweaters,  a 3.6% decrease in the price index for girls' apparel, and a 3.4% decrease in the price index for infants' and toddlers' apparel...on the other hand, the price index for transportation commodities other than fuel was 0.2% higher, as new truck prices rose 0.7%, prices for new cars rose 0.1% and the price index tires rose 0.3%....however, prices for medical care commodities 0.8% lower, as non-prescription drug prices fell 1.3% and the price index for medical equipment and supplies fell 1.4%...meanwhile, the recreational commodities index was 0.1% lower on a 0.4% decrease in TV prices, a 1.4% decrease in the price index for pets, pet supplies, accessories, a 1.0% decrease in the price index for photographic equipment, and a 1.5% decrease in the price index for sports equipment...at the same time, the education and communication commodities index was 0.2% lower on a 0.5% decrease in the price index for computers, peripherals, and smart home assistants and a 0.1% decrease in the price index for telephone hardware, calculators, and other consumer information items...lastly, a separate price index for alcoholic beverages was 0.3% higher, while the price index for ‘other goods’ was down 0.1% on a 0.4% decrease in the price index for hair, dental, shaving, and miscellaneous personal care products..

Within core services, the price index for shelter was 0.1% higher as rents rose 0.2% and homeowner's equivalent rent rose 0.2% while prices for lodging away from home at hotels and motels fell 3.7%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.2%, and other household operation costs were on average 0.3% higher on a 1.2% increase in domestic services....meanwhile, the price index for medical care services was 0.3% lower, as the price index for hospital services fell 0.6% and the price of health insurance fell 1.2%... however, the transportation services price index was 0.1% higher as airline fares rose 6.3% and car and truck rentals rose 7.4% while vehicle insurance costs fell 2.3% and the price index for intracity mass transit fell 9.3%...meanwhile, the recreation services price index rose 0.7% as the index for photo processing rose 3.2%, the index for pet services rose 0.8% and the index for admissions to movies, concerts and sporting events rose 1.0%....at the same time, the index for education and communication services was 0.1% higher as the price index for technical and business schools tuition and fees rose 0.6% and the price index for land line telephone services rose 1.9%...lastly, the index for other personal services was down 0.1% as the price index for checking account and other bank services fell 3.2% and the price index for apparel services other than laundry and dry cleaning was 0.2% lower...

Among core line items, prices for televisions, which are still averaging 10.4% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 12.5% since last October, the price index for computer software and accessories, which is down 13.4% year over year, the price index for men's suits, sport coats, and outerwear, which has fallen 23.4% from a year ago, the price index for women's dresses, which has fallen by 16.5% in the past year, the price index for men's shirts and sweaters, which is down by 12.4% from a year ago, the price index for boys' apparel, which has fallen by 10.1% in the past year, the price index for lodging away from home including hotels and motels, which has fallen by 15.9% in the past year, and airline fares, which are now down by 20.0% since last October, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is still up by 10.2% over the past year, the price index for used cars and trucks, which has risen 11.5% from a year ago, the price index for infant's equipment, which is up by 11.3% year over year, and the price index for major appliances, which is up 13.7% from last October, are the only line items to have increased by a double digit magnitude over that span.... 

Producer Prices rose 0.3% in October on Higher Wholesale Food & Energy Prices and Higher Margins for Transportation Services

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

As noted, the price index for final demand for goods, aka 'finished goods', was 0.5% higher in October, after being 0.4% higher in September, 0.1% higher in August, 0.9% higher in July, 0.4% higher in June, 1.5% higher in May, 3.0% lower in April, 1.0% lower in March, 0.9% lower in February, 0.3% higher in January, 0.2% higher in December, 0.3% higher in November, a 0.5% higher in October of last year....the finished goods index rose 0.5% in October because the price index for wholesale energy goods was 0.8% higher, after it had fallen by 0.3% in September, 0.1% in August, risen by 5.4% in July, by 9.6% in June and 4.3% in May, and because the price index for wholesale foods rose 2.4%, after rising by 1.2% in September, falling 0.4% in August, 0.5% in July, and a revised 4.9% in June, while the index for final demand for core wholesale goods (excluding food and energy) was unchanged, after being 0.4% higher in September and 0.3% higher in July and August....wholesale energy prices averaged 0.8% higher due to a 5.5% increase in wholesale prices for gasoline, a 2.5% increase in wholesale prices for LP gas, and a 3.0% increase in wholesale prices for No.2 diesel fuel, while the wholesale food price index rose 2.4% on a 25.5% increase in wholesale prices for fresh eggs, a 26.8% increase in the wholesale price index for fresh and dry vegetables, and a 6.7% increase in the wholesale price index for grains....among wholesale core goods, the wholesale price index for metal forming machine tools rose 3.3% and the wholesale price index for mobile homes rose 6.6% while the wholesale price index for light trucks fell 1.1% and the wholesale price index for passenger cars fell 0.8%,,...

At the same time, the index for final demand for services rose 0.2% in October, after rising 0.4% in September, 0.5% in August, and a revised 0.2% in both June and July, as the index for final demand for trade services rose 0.2%, the index for final demand for transportation and warehousing services rose 1.1%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.1% higher... among trade services, seasonally adjusted margins for RVs, trailers, and campers retailers rose 9.9%, margins for hardware, building materials, and supplies retailers rose 7.3%, margins for auto parts and tire retailers rose 4.5%, and margins for fuels and lubricants retailers rose 2.2%... among transportation and warehousing services, margins for airline passenger services rose 1.2% while margins for truck transportation of freight rose 1.3%...among the components of the core final demand for services index, the index for arrangement of cruises and tours rose 13.4%, the index for securities brokerage, dealing, investment advice, and related service rose 3.1%, and margins for tax preparation and planning also rose 3.1%, while margins for gaming receipts (partial) fell 6.7%…

This report also showed the price index for intermediate processed goods rose 0.3% in October, after rising 1.0% in September, 0.6% in August, 1.5% in July, and 1.3% in June, but after being unchanged in May and falling the prior 5 months....the price index for intermediate energy goods fell 0.3%, as producer prices for natural gas sold to electric utilities fell 10.6% and producer prices for natural gas sold to industry fell 6.4%, while refinery prices for gasoline rose 5.5%... meanwhile, the price index for intermediate processed foods and feeds rose 2.2%, as the producer price index for meats rose 3.7%, the producer price index for fats and oil rose 2.7% and the producer price index for prepared animal feeds rose 3.4%...at the same time, the core price index for intermediate processed goods less food and energy rose 0.2% as the producer price index for plywood rose 7.3%, the producer price index for building paper and board rose 7.7%, and the producer price index for secondary nonferrous metals rose 3.7%...however, prices for intermediate processed goods are still 1.5% lower than in September a year ago, the 18th consecutive year over year decrease, following 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as prices for intermediate goods fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods rose 2.6% in October, after rising 3.9% in September, 7.0% in August, falling a revised 1.8% in July and rising a revised 5.1% in June and 8.6% in May, but after falling 12.6% in April and 8.5% in March....that was as the October price index for crude energy goods rose 4.5% as crude oil prices rose 13.8% while unprocessed natural gas prices fell 4.6%, and as the price index for unprocessed foodstuffs and feedstuffs rose 2.3% despite an 18.4% drop in the price of raw milk, as producer prices for slaughter hogs rose 14.2%, producer prices for slaughter chickens rose 11.2%, and producer prices for wheat rose 10.1%...at the same time, the index for core raw materials other than food and energy materials rose 0.6%, as producer prices for hides and skins rose 28.7% and the producer price index for logs, bolts, timber, pulpwood, and woodchips increased 2.5%....however, this raw materials index is still 3.4% lower than a year ago, as the year over year change on this index has been negative since the beginning of 2019...

Lastly, the price index for services for intermediate demand rose 0.8% in October, after rising 1.0% in September, 0.7% in August, 0.7% in July, and a revised 0.2% in June, after falling revised 0.3% in May, and falling 1.7% in April...the price index for intermediate trade services was 1.1% higher, as margins for intermediate automotive parts, including tires, retailers rose 4.5% and margins for intermediate metals, minerals, and ores wholesalers rose 8.3%...meanwhile, the index for transportation and warehousing services for intermediate demand was 1.6% higher, as the intermediate price index for arrangement of freight and cargo rose 17.3% and the intermediate price index for truck transportation of freight rose 1.3%...at the same time, the core price index for intermediate services less trade, transportation, and warehousing was 0.5% higher, as the price index for broadcast and network television advertising time rose 15.0%, the price index for internet advertising space sales, excluding internet ads sold by print publishers rose 7.5%, and the intermediate price index for securities brokerage, dealing, investment advice, and related services rose 3.1%...over the 12 months ended in October, the year over year price index for services for intermediate demand is now 1.6% higher than it was a year ago, the second positive annual change since it turned negative year over year in April for the first time in the history of this index...

Job Openings and Job Quitting Higher in September, Hiring Down, Layoffs at a Record Low

The Job Openings and Labor Turnover Survey (JOLTS) report for September from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 84,000, from 6,352,000 in August to 6,436,000 openings in September, after August job openings were revised 141,000 lower, from 6,493,000 to 6,352,000...September jobs openings were still 8.7% lower than the 7,046,000 job openings reported in September a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged at 4.3% in September, while it was down from 4.4% in September a year ago...largest percentage job opening changes included a 41,000 job opening increase to 279,000 openings in the transportation, warehousing, and utility sector and a 52,000 decrease to 653,000 openings in retail (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in September, seasonally adjusted new hires totaled 5,871,000, down by 119,000 from the revised 5,952,000 who were hired or rehired in August, as the hiring rate as a percentage of all employed fell to 4.1% in September from 4.2% in August, while it was up from the 3.9% rate in September a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 25,000, from 4,689,000 in August to 4,664,000 in September, while the separations rate as a percentage of the employed remained unchanged at 3.3%, while it was down from 3.8% in September a year ago (see table 3)...subtracting the 4,664,000 total separations from the total hires of 5,871,000 would imply an increase of 1,207,000 jobs in September, quite a bit more than the revised payroll job increase of 672,000 for September reported in the October establishment survey last week, with 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 3,018,000 of us voluntarily quit our jobs in September, up from the revised 2,839,000 who quit their jobs in August, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.0% of total employment in August to 2.1% in September, which was still down from 2.3% a year earlier (see job details in table 4)....in addition to those who quit, another 1,333,000 were either laid off, fired or otherwise discharged in September, down by 200,000 from the revised 1,533,000 who were discharged in August and the lowest on record, as the discharges rate fell from 1.1% to a record low at 0.9% of all those who were employed during the month, which was also down from the discharges rate of 1.3% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 314,000 in September, down from 317,000 in August, for an 'other separations rate’ of 0.2%, which was unchanged from August and from September 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 of which are picked from the aforementioned GGO posts, contact me…)  

Sunday, November 8, 2020

October's jobs report; September's trade deficit, construction spending, factory inventories and wholesale inventories, et al

The major economic releases from the past week included the Employment Situation Summary for October from the Bureau of Labor Statistics, and four September reports that included metrics which were either estimated or included in last week's release of 3rd quarter GDP: the Commerce Dept report on our International Trade for September, the September report on Construction Spending (pdf), the Full Report on Manufacturers' Shipments, Inventories and Orders for September, and the September report on Wholesale Trade, Sales and Inventories, all from the Census Bureau...

Privately issued reports included the ADP Employment Report for October, the light vehicle sales report for October from Wards Automotive, which estimated that vehicles sold at a 16.21 million annual rate in October, down from the 16.34 million annual sales rate in September, and down from the 16.55 million annual sales rate of a year ago, and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the October Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 59.3% in October, up from 55.4% in September, which suggests an acceleration of activity among manufacturing firms nationally, and the October 2020 Services Report On Business, which saw their Services PMI slip to 56.6%, down from 57.8% in September, indicating a smaller plurality of service industry purchasing managers reported growth in various facets of their business in October...

Employers Add 638,000 Jobs in October, Unemployment Rate Falls to 6.9%

The Employment Situation Summary for October indicated that the rebound in payroll jobs from their April nadir continued for a 6th consecutive month, and that the unemployment rate fell by 1.0% to 6.9%, while the employment rate rose by 0.8% to 57.4%….estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 638,000 jobs in October, after the previously estimated payroll job change for September was revised from an increase of 661,000 jobs to one of 672,000, while the payroll jobs increase for August was also revised higher, from 1,489,000 to 1,493,000...however, despite 6 months of solid job gains, October's non-farm payrolls still remained 10,063,000 jobs below the 152,436,000 seasonally adjusted jobs that were reported in February....meanwhile, the unadjusted data shows that there were actually 1,605,000 more payroll jobs extent in October than in September, as the normal seasonal job increases in the education and retail sectors were washed out of the headline number by the seasonal adjustment...

Seasonally adjusted job increases in October were seen throughout the private goods producing and service sectors, with only the government sector seeing major job losses, which included 138,800 at the Federal level (due to the furloughing of 147,000 census workers), 61,400 in state education, and 97,800 in local education.....October's largest job increase was in the leisure and hospitality sector, which gained 271,000 jobs, anchored by 192,200 returning jobs in bars and restaurants and 23,900 additional jobs in performing arts and spectator sports...the broad professional and business services sector saw the addition of 208,000 jobs, with 108,700 more employed by temporary employment agencies, and 19,000 new jobs in services to buildings and dwellings...the retail sector saw an increase of 103,700 jobs, with 31,200 workers returning to jobs in electronics and appliance stores and 13,600 returning to jobs in furniture and home furnishings stores....meanwhile, construction employment rose by 84,000, including 27,500 jobs with nonresidential specialty trade contractors and 18,800 more employed by heavy and civil engineering construction contractors...at the same time, employment in health care and social assistance rose by 79,700, led by the addition of 16,200 jobs in hospitals and 14,300 jobs in doctor's offices....October also saw the addition of 63,200 jobs in transportation and warehousing, with 28,100 of those in warehousing and storage and 25,200 in transit and ground passenger transportation...."other services" also added 47,000 more to the month's total, with 27,100 of those in personal and laundry services and 17,900 performing repair and maintenance jobs....in addition, employment in manufacturing increased by 38,000, with 7,200 of those working in manufacture of fabricated metal products and 6,000 more in the primary metals industry....another 31,000 jobs were added in various financial activities, led by 10,400 in real estate and 7,500 in nondepository credit intermediation....meanwhile, employment in other major sectors, including resource extraction, wholesale trade, utilities, and information, saw little change in October, while the private educational services sector posted a seasonally adjusted decrease of 21,500 jobs...

The establishment survey also showed that average hourly pay for all employees rose by 4 cents an hour to $29.50 an hour in October, after it had increased by a revised penny an hour in September; meanwhile, the average hourly earnings of production and nonsupervisory employees increased by 5 cents an hour to $24.82 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.8 hours in October, while hours for production and non-supervisory personnel increased by 0.1 hour to 34.2 hours...at the same time, the manufacturing workweek increased by 0.3 hour to 40.5 hours, while average factory overtime rose by 0.2 hour to 3.2 hours...

Meanwhile, the October household survey indicated that the seasonally adjusted extrapolation of those who would report being employed rose by an estimated 2,243,000 to 149,806,000, while the estimated number of those unemployed and looking for work fell by 1,519,000 to 11,061,000; and hence the labor force increased by a rounded total of 724,000....since the working age population had grown by 183,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 541,000 to 100,058,000...at the same time, the increase in the labor force was enough to increase the labor force participation rate by 0.3%, from 61.4% in September to 61.7% in October...in addition, the increase in number employed was enough to increase the employment to population ratio, which we could think of as an employment rate, from 56.6% in September to 57.4% in October...similarly, the corresponding decrease in the number unemployed was enough to cause the unemployment rate as a percentage of the labor force to decrease from 7.9% to 6.9%...meanwhile, the number of those who reported they were forced to accept just part time work rose by 383,000, from 6,300,000 in September to 6,683,000 in October, which wasn't enough to raise the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", as it still fell from 12.8% in September to 12.1% of the labor force in October, the lowest since March...

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

September Trade Deficit Down 4.7% on Lower Imports of Cellphones and Finished Metal Shapes

Our trade deficit fell by 4.7% in September as the value of both our exports and our imports increased, but our exports increased by more than three times as much....the Commerce Dept report on our international trade in goods and services for September indicated that our seasonally adjusted goods and services trade deficit fell by a rounded $3.2 billion to $63.9 billion in September from a revised August deficit of $67.0 billion, which had previously been reported at $67.1 billion...the value of our September exports rose by a rounded $4.4 billion to $176.4 billion on a $3.7 billion increase to $122.8 billion in our exports of goods and a $0.7 billion increase to $53.6 billion in our exports of services, while our imports rose by a rounded $1.2 billion to $240.2 billion on a $0.6 billion increase to $203.5 billion in our imports of goods and a $0.6 billion increase to $36.8 billion in our imports of services...export prices were 0.6% higher in September, which means the relative real increase in exports for the month was smaller than the nominal increase by that percentage, while import prices were 0.3% higher, meaning the increase in real imports was also smaller than the nominal dollar change reported here by that percentage....

The increase in our September exports of goods was led by higher exports of foods, feeds, and beverages and an increase in exports of capital goods...referencing the Full Release and Tables for September (pdf), in Exhibit 7 we find that our exports of foods, feeds and beverages rose by $1,621 million to $12,889 million on a $1,383 million increase in our exports of soybeans and that our exports of capital goods rose by $1,368 million to $37,667 million on a $382 million increase in our exports of telecommunications equipment and a $273 million increase in our exports of industrial engines....in addition, our exports of automotive vehicles, parts, and engines rose by $311 million to $12,515 million on a $446  million increase in our exports of automotive parts other than tires, engines, bodies and chassis, and our exports of industrial supplies and materials rose by $270 million to $39,367 million as a $401 million increase in our exports of petroleum products other than fuel oil and a $334 million increase in our exports of chemicals other than than those itemized separately were offset by a $715 million decrease in our exports non-monetary gold and a $316 million decrease in our exports of fuel oil...lastly, our exports of consumer goods rose by $193 million to $15,292 million on a $234 million increase in our exports of pharmaceuticals, and our exports of other goods not categorized by end use rose by $121 million to $4,816 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of automotive vehicles, parts, and engines and of capital goods were responsible for the $565 million increase in our goods imports, while they were partially offset by decreases in our imports of consumer goods and of industrial supplies and materials...our imports of automotive vehicles, parts and engines rose by $3,179 million to $31,192 million on a $2,407 million increase in our imports of of new and used passenger cars and a $427 million increase in our imports of vehicle parts and accessories other than bodies and chassis, engines and tires, and our imports of capital goods rose by $835 million to $55,513 million on a $611 million increase in our imports of computers and a $541 million increase in our imports of telecommunications equipment, which in turn were partly offset by a $627 million decrease in our imports of civilian aircraft…in addition, our imports of foods, feeds, and beverages rose by $159 million to $12,772 million....largely offsetting those increases, our imports of consumer goods fell by $2,056 million to $55,770 million on a $2,293 million decrease in our imports of cellphones and a $713 decrease in our imports of pharmaceuticals, our imports of industrial supplies and materials fell by $1,320 million to $36,888 million on a $1,372 million decrease in our imports of finished metal shapes, a $573 million decrease in our imports non-monetary gold, a $437 million decrease in our imports of crude oil, and a $317 million decrease in our imports of organic chemicals, which in turn were partly offset by a $500 million increase in our imports of precious metals other than gold and a $453 million increase in our imports of petroleum products other than fuel oil, while our imports of other goods not categorized by end use fell by $585 million to $19,008 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 September figures show surpluses, in billions of dollars, with South and Central America ($2.5), OPEC ($1.4), Hong Kong ($1.3), Brazil ($1.1), United Kingdom ($0.8), Singapore ($0.3), and Saudi Arabia ($0.2). Deficits were recorded, in billions of dollars, with China ($24.3), European Union ($17.3), Mexico ($10.7), Japan ($5.6), Germany ($5.6), Italy ($2.7), Taiwan ($2.7), India ($2.7), South Korea ($2.2), Canada ($1.4), and France ($1.1).

  • The deficit with China decreased $2.1 billion to $24.3 billion in September. Exports increased $0.8 billion to $12.0 billion and imports decreased $1.3 billion to $36.4 billion.
  • The deficit with Mexico decreased $1.8 billion to $10.7 billion in September. Exports increased $1.3 billion to $18.5 billion and imports decreased $0.5 billion to $29.2 billion.
  • The deficit with the European Union increased $1.6 billion to $17.3 billion in September. Exports increased $0.3 billion to $19.6 billion and imports increased $1.9 billion to $36.9 billion.

In last week's advance report on 3rd quarter GDP, the contribution of September trade was estimated based on the sketchy Advance Report on our International Trade in Goods which was released last week, just before the GDP release...that report estimated that our seasonal adjusted September goods trade deficit was at $79,374 million on a Census basis, down from the $83,113 million goods deficit in August, on goods exports valued at $121,992 million and goods imports valued at $201,367 million...this report revises that and shows that our actual goods trade deficit in September was $80,686 billion on a balance of payments basis, and $79,355 million on a Census basis, on Census adjusted goods exports of $122,546 million and Census adjusted goods imports of $201,902 million...in addition, the Census basis August goods trade deficit was revised from $83,113 million to $83,080 million...together, those revisions from the previously published data mean that the 3rd quarter trade deficit in goods was on the order of $43 million less than was included in last week's GDP report, or roughly $0.17 billion on an annualized basis, which would have a negligible impact on 3rd quarter GDP when the 2nd estimate is released at the end of November... 

Construction Spending up 0.3% in September, Has  Negligible Impact on Q3 GDP

The Census Bureau's report on construction spending for September (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,414.0 billion annually if extrapolated over an entire year, which was 0.3 percent (±1.0 percent)* above the revised annualized August estimate of $1,410.4 billion and 1.5 percent (±1.3 percent) above the estimated annualized level of construction spending in September of last year...the annualized August construction spending estimate was revised 0.2% lower, from $1,412.8 billion to $1,410.4 billion, while the annual rate of construction spending for July was revised 0.5% higher, from $1,392.7 billion to $1,398.952 billion...

A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:the same period in 2019.

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,074.9 billion, 0.9 percent (±0.7 percent) above the revised August estimate of $1,065.6 billion. Residential construction was at a seasonally adjusted annual rate of $610.9 billion in September, 2.8 percent (±1.3 percent) above the revised August estimate of $594.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $464.1 billion in September, 1.5 percent (±0.7 percent) below the revised August estimate of $471.3 billion.
  • Public Construction: In September, the estimated seasonally adjusted annual rate of public construction spending was $339.1 billion, 1.7 percent (±1.5 percent) below the revised August estimate of $344.8 billion. Educational construction was at a seasonally adjusted annual rate of $85.3 billion, 2.0 percent (±1.8 percent) above the revised August estimate of $83.7 billion. Highway construction was at a seasonally adjusted annual rate of $89.3 billion, 5.4 percent (±4.1 percent) below the revised August estimate of $94.5 billion.

The BEA's key source data and assumptions (xls) that accompanied the 3rd quarter GDP report indicates that they had estimated that September's residential construction would increase by an annualized $7.8 billion from the previously published figures, that nonresidential construction would decrease by an annualized $1.3 billion from last month's report, and that September's public construction would decrease by an annualized $1.0 billion from last month's report....hence, the total of the figures used by the BEA for total September construction in the 3rd quarter GDP report were a net $5.5 billion higher than the previously published August figure...since this report indicates that September construction was up by $3.6 billion from an August figure that was revised $2.4 billion lower, that means that the September figures used in the GDP report were $4.3 billion too high...averaging that overestimation with the $2.4 billion downward revision to August construction spending and the $6.3 billion upward revision to July's construction spending means the aggregate annualized construction figures used in the 3rd quarter GDP were just a bit more than $0.1 billion too high, suggesting a negligible downward revision to 3rd quarter GDP to account for what this report shows...

Factory Shipments Up 0.3% in September, Factory Inventories Statistically Unchanged

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for September from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $5.2 billion or1.1 percent to $475.0 billion in September, following an increase of 0.6% to $469.8 billion in August, which was revised from the 0.7 percent increase to $470.1 billion that was reported for August 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 revised updates to the September advance report on durable goods we reported on last week...on those durable goods revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in September, up five consecutive months, increased $5.2 billion or 1.1 percent to $475.0 billion, the U.S. Census Bureau reported today. This followed a 0.6 percent August increase. Shipments, also up five consecutive months, increased $1.6 billion or 0.3 percent to $482.8 billion. This followed a 0.3 percent August increase. Unfilled orders, down six of the last seven months, decreased $2.5 billion or 0.2 percent to $1,075.9 billion. This followed a 0.6 percent August decrease. The unfilled orders-to-shipments ratio was 6.59, down from 6.60 in August. Inventories, up four of the last five months, increased $0.2 billion or virtually unchanged to $686.7 billion. This followed a virtually unchanged August increase. The inventories-to-shipments ratio was 1.42, down from 1.43 in August.
  • New orders for manufactured durable goods in September, up five consecutive months, increased $4.4 billion or 1.9 percent to $237.4 billion, unchanged from the previously published increase. This followed a 0.4 percent August increase. Transportation equipment, up four of the last five months, led the increase, $3.1 billion or 4.1 percent to $76.8 billion. New orders for manufactured nondurable goods increased $0.7 billion or 0.3 percent to $237.6 billion.
  • Shipments of manufactured durable goods in September, up four of the last five months, increased $0.9 billion or 0.4 percent to $245.2 billion, up from the previously published 0.3 percent increase. This followed a 0.2 percent August decrease. Transportation equipment, also up four of the last five months, led the increase, $0.5 billion or 0.6 percent to $82.0 billion. Shipments of manufactured nondurable goods, up five consecutive months, increased $0.7 billion or 0.3 percent to $237.6 billion. This followed a 0.8 percent August increase. Beverage and Tobacco products, up six of the last seven months, led the increase, $0.3 billion or 2.0 percent to $13.8 billion.
  • Unfilled orders for manufactured durable goods in September, down six of the last seven months, decreased $2.5 billion or 0.2 percent to $1,075.9 billion, unchanged from the previously published decrease. This followed a 0.6 percent August decrease. Transportation equipment, down seven consecutive months, drove the decrease, $5.2 billion or 0.7 percent to $722.0 billion. 
  • Inventories of manufactured durable goods in September, up following three consecutive monthly decreases, increased $1.4 billion or 0.3 percent to $421.8 billion, down from the previously published 0.4 percent increase. This followed a 0.1 percent August decrease. Transportation equipment, up twenty-four of the last twenty-five months, led the increase, $0.9 billion or 0.6 percent to $147.8 billion. Inventories of manufactured nondurable goods, down two of the last three months, decreased $1.3 billion or 0.5 percent to $264.9 billion. This followed a 0.3 percent August increase. Petroleum and coal products, also down two of the last three months, drove the decrease, $1.7 billion or 5.1 percent to $30.9 billion. By stage of fabrication, September materials and supplies decreased 0.6 percent in durable goods and 1.0 percent in nondurable goods. Work in process increased 1.8 percent in durable goods and decreased 0.8 percent in nondurable goods. Finished goods decreased 0.5 percent in durable goods and were virtually unchanged in nondurable goods.

The BEA's key source data and assumptions (xls) for 3rd quarter GDP indicates that they had estimated that the value of non-durable goods inventories would  increase by $0.8 billion on a Census basis in September before they estimated the 3rd quarter’s output, so the actual $1.3 billion decrease reported here would indicate that they overestimated the end of 3rd quarter GDP inventory component by about $2.1 billion, or by ~$8.4 billion on an annualized basis, which would imply that 3rd quarter GDP will have to be revised downwards by about 0.19 percentage points to account for what this report shows...

September Wholesale Sales Up 0.1%, Wholesale Inventories Up 0.4%

The September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was $486.0 billion, up 0.1 percent (±0.4 percent)* from the revised August level, but down 2.3 percent (±1.1 percent)* from the wholesale sales of September 2019... the August preliminary estimate was revised down to $485.7 billion from the $486.6 billion in wholesale sales reported last month, which thus revised the July to August change in sales from up 1.4% (±0.5 percent) to up 1.2 percent (±0.5 percent)....as an intermediate economic 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, since additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted $638.5 billion at month end, up 0.4 percent (±0.2 percent) from the revised August level but 3.9 percent (±0.9 percent) lower than in September a year ago....August's inventory value was revised from the $635.5 billion reported last month to $636.2 billion, which meant that the July to August percent change was revised from last month's estimate of up 0.4 percent (+/-0.2%) to up 0.5 percent (±0.2 percent)..

In the advance report on 3rd quarter GDP of last week, wholesale inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release...that report estimated that our seasonally adjusted wholesale inventories were valued at $634,770 million at the end of September, down 0.1 percent from a revised $635,172 million in August....that's $3.718 billion more than the $638,488 million of wholesale inventories for the end of the quarter that this report shows, which would imply that the quarterly change in 3rd quarter wholesale inventories was underestimated at roughly a $14.9 billion annual rate...assuming there's no imbalance in the inflation adjustments on those inventories, that would mean that the growth rate of 3rd quarter GDP was underestimated by around 0.34 percentage points based just on what this report shows, which will be partly offset by the overestimation we just saw in factory inventories...

 

(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…)