Sunday, May 2, 2021

1st quarter GDP; March incomes & outlays, and March durable goods

The key economic releases from the past week that we'll review today are the advance estimate of 1st quarter GDP and the concurrent March report on Personal Income and Spending, both from the Bureau of Economic Analysis....other widely watched releases included the March advance report on durable goods and , and the February Case-Shiller Home Price Index from S&P Case-Shiller, which reported that the relative average of December, January and February home prices was 12.0% higher than average prices for the same homes that sold during the same 3 month period a year earlier...

This week also saw the release of the last two regional Fed manufacturing surveys for April: the Dallas Fed Texas Manufacturing Outlook Survey, covering Texas, western Louisiana and eastern New Mexico, reported their general business activity composite index rose to +37.3 in April, up from +28.9 in March, indicating that a large majority of Texas business have been reporting expansion during April, while the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index remained at +17 in April, indicating an ongoing expansion among that region's manufacturing firms..

1st Quarter GDP Grew at a 6.4% Rate on Government Stimulus Spending

Our economy grew at a 6.4% rate in the 1st quarter, quite a bit stronger than during the fourth quarter, as stimulus supported growth in personal consumption of goods and increased federal government consumption outlays more than offset weaker private investment. shrinking inventories, falling exports, and the negative impact of rising imports...the Advance Estimate of 1st Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 6.4% annual rate from the output of the 4th quarter of 2020, when our real output grew at a 4.3% real rate...in current dollars, our first quarter GDP grew at a 10.72% annual rate, increasing from what would work out to be a $21,494.7 billion a year output rate in the 4th quarter of last year to a $22,048.9 billion annual rate in the 1st quarter of this year, with the headline 6.4% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 4.1%, aka the GDP deflator, was computed from the price changes of the components and applied to their current dollar change.... 

As is usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have averaged +/-0.6% in either direction before the third estimate for the quarter is released, which will be two months from now....note that March construction, March trade in services, and non-durables inventory data have yet to be reported, and that the BEA assumed a ​$15 billion increase in exports of services, a ​$2.5 billion​ increase in imports of services, a ​$​7.6 billion increase in residential construction, a ​$1.2 billion decrease in non-residential construction, a ​$2.9 billion increase in public construction, and a ​$​34.5​ billion ​decrease in nondurable manufacturing inventories for March before they estimated 1st quarter output (see the Key source data and assumptions excel file that accompanies this report for more specific details)..

While we cover the details on the 1st quarter below, remember that the news release for the Advance Estimate 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 indexes chained from 2012 prices, 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, because real GDP is not a monetary metric....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the advance estimate of 1st quarter GDP, which we find on the BEA GDP landing page, where you can also find links to just the tables on Excel and other technical notes...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2017, table 2, which shows the contribution of each of the components to the GDP growth figures for those quarters and years, table 3, which shows both the current dollar value and the inflation adjusted value in 2012 dollars of each of those components, and table 4, which shows the change in the price indexes for each of the GDP components....

Our Personal consumption expenditures (PCE), which are used to compute almost 70% of GDP,  grew at a 14.6% rate in current dollars in the 1st quarter, which worked out to a real growth rate of 10.7% in consumed goods and services after an annualized PCE price index increase averaging 3.5% was used to adjust that personal spending for inflation....consumer outlays for durable goods grew at a 42.8% rate in current dollars while prices of those durable goods were on average 5.4% higher, and as a result the BEA found that real growth in output of consumer durables grew at a 41.4% rate, as an increase in real consumption of motor vehicles and parts at a 51.5%​ rate​ accounted for about a third of the growth in durable goods output....the BEA also found that real output of consumer non-durable goods grew at a 14.4% rate after an increase in consumer spending for non-durable goods at a 23.5% rate was adjusted for an average jump in non-durable prices at a 8.0% rate, as increased real consumption of food and beverages accounted for 35% and increased real consumption of clothiing and footware accounted for 30% of the quarter's nondurable growth... meanwhile, the 7.3% nominal growth in consumer outlays for services was deflated by a 2.6% increase in prices for services to show that real output of consumer services grew at a 4.6% annual rate, as 25.8% real growth of food services and accommodations accounted for 35% of the quarter's growth in services....as a result of these changes in growth from the 4th to the 1st quarter, the increase in outlays for durable goods added 2.95 percentage points to 1st quarter GDP,  the increased consumption of non-durable goods added 2.00 percentage points to the growth of GDP, and increased consumption of services added 2.07 percentage points to the growth rate of the 1st quarter economy..

The change in other components of the change in GDP is computed by the BEA in the same manner that we have just illustrated for computing real PCE; ie, the annualized increase in current dollar spending for the quarter is adjusted with the annualized inflation factor for that component, yielding the change in real units of goods or services produced during the quarter, at an annual rate......thus, after inflation adjustments, real gross private domestic investment, which had grown at a 27.8% annual rate in the 4th quarter of 2020, shrunk at a 5.0% annual rate from there in the 1st quarter...however, ​that gross decrease was due to falling inventories; real fixed investment still grew at a 10.1% annual rate in the 1st quarter, after growing at a 18.6% rate in the 4th quarter...among fixed investments, real non-residential fixed investment grew at a 9.9% rate as real investment in non-residential structures shrunk at a 4.8% rate and subtracted 0.12 percentage points from 1st quarter GDP, while real investment in equipment grew at a 16.7% rate and added 0.93 percentage points to 1st quarter GDP, and real investment in intellectual property grew at 10.1% rate and added 0.65 percentage points to GDP....at the same time, real residential investment grew at a 10.8% rate and added 0.49 percentage points to GDP....for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3.....

Meanwhile, a contraction of real inventories reduced overall gross investment and hence GDP, as real private inventories shrunk by an inflation adjusted $85.5 billion in the quarter, after growing at an inflation adjusted $62.1 billion in the 4th quarter...as a result, the rounded $147.5 billion negative change in real inventory growth subtracted 2.64 percentage points from the 1st quarter's growth rate, after a $65.8 billion increase in real inventory growth in the 4th quarter had added 1.37 percentage points to that quarter's GDP....however, since growth in inventories indicates that more of the goods produced during the quarter would have been left in storage or "sitting on the shelf”, the $147.5 billion reversal of their growth conversely means real final sales of GDP were actually greater by that amount, and hence real final sales of GDP grew at a 9.2% rate in the 1st quarter, up from the real final sales growth rate of 2.9% in the 4th quarter, when the increase in inventory growth meant that the quarter’s growth in real final sales was smaller than that of the quarter's GDP...

Meanwhile, our real exports of goods and services shrunk at a 1.1% rate in the 1st quarter, after growing at a 22.3% rate in the 4th quarter of 2020, while our real imports grew at a 5.7% rate in the 1st quarter, after rising at a 29.8% rate in the 4th quarter....as you'll recall, real increases in exports add to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted in GDP figures elsewhere), so conversely that 1.1% decrease in 1st quarter exports subtracted 0.10 percentage points from 1st quarter GDP, after exports had added 2.04 percentage points to 4th quarter GDP....on the other hand, real increases in imports subtract from GDP because they are either consumption or investment that was added to another GDP component that shouldn't have been, because it was not produced in our country and not part of our national product…hence, the 5.7% decrease in real imports in the 1st quarter subtracted 0.77 percentage points from 4th quarter GDP, after the greater increase in imports had subtracted 3.57 percentage points from 4th quarter GDP.... hence our worsening trade imbalance subtracted a net of 0.87 percentage points from 1st quarter GDP, after our worsening trade deficit had subtracted a rounded 1.53 percentage points from GDP in the fourth quarter…

Finally, real consumption and investment by all branches of government grew at a 6.3% annual rate in the 1st quarter, after decreasing at a 0.8% rate in the 4th quarter, as federal government consumption and investment grew at a 13.9% rate, after shrinking at a 0.9% rate in the 4th quarter, while state and local consumption and investment grew at a 1.7% rate, after also shrinking at a 0.9% rate in the 4th quarter....at the federal level, inflation adjusted spending for defense shrunk at a 3.4% rate and subtracted 0.14 percentage points from 1st quarter GDP growth, while real non-defense federal consumption and investment grew at a 44.8% rate and added 1.07 percentage points to GDP ...note that federal 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 goods or services....meanwhile, state and local government investment and consumption expenditures grew at an 1.7% annual rate and added 0.19 percentage points to the quarter's growth rate, even as a contraction of real state and local investment at an 6.5% rate subtracted 0.14 percentage points from the quarter's growth rate...

March Personal Income Rose 21.1%, Personal Spending Rose 4.2% , PCE Price Index Rose 0.5%

Friday's release of the March Income and Outlays report from the Bureau of Economic Analysis was concurrent with the GDP release on Thursday, and all the PCE data in the first quarter GDP report we just covered actually originated with this report...and like that GDP report, all the dollar values reported here are at an annual rate and seasonally adjusted, ie, they tell us what personal income, spending and saving would be for a year if March's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one 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 February to March....thus, when the opening phrase of the press release for this report tell us "Personal income increased $4.21 trillion (21.1 percent) in March...", it means that the annualized figure for all types of personal income in March, $24,207.7 billion, was roughly $4.21 trillion, or statistically 21.1% more than the annualized personal income figure $19,994.9 for February; the actual increase in personal income from February to March is not given....similarly, disposable personal income, which is income after taxes, rose by almost 23.6%, from an annual rate of $17,721.0 billion in February to an annual rate of $21,902.4 billion in March...the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...thus, we can see the reason for the $4.21 trillion annual rate of increase in personal income in March was a $3,985.5 billion annualized increase in government social benefits to individuals; the $296.1 billion increase in wages and salaries and the $145.2 billion increase in proprietor's income were minor contributors by comparison…

At the same time, seasonally adjusted personal consumption expenditures (PCE) for March, which were included in the change in PCE in the 1st quarter GDP report, rose at a $616.0 billion annual rate to a $15,401.6 billion pace of consumer spending annually, almost 4.2% above that of February's, after February's PCE was revised from the previously reported annual rate of $14,790.1 billion to $14,785.5 billion...the current dollar increase in March's spending included a $213.1 billion annualized increase to an annualized $10,001.3 billion in spending for services and a $403.0 billion increase to a record high $5,400.3 billion in annualized spending for goods....total personal outlays for March, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $616.4 billion to $15,866.1 billion, which left personal savings, which is disposable personal income less total outlays, at a $6,036.3 billion annual rate in March, up from the revised $2,471.3 billion in annualized personal savings in February...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 27.6%, up from 13.9% in February, and the highest personal savings rate since April 2020..

While our personal consumption expenditures accounted for 69.9% of our first quarter GDP, before they were included in the measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption.....the BEA does that by computing a price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is then applied to the current dollar spending....from Table 9 in the pdf for this report, we find that that index rose to 113.285 in March from 112.704 in February, giving us month a over month inflation rate of 0.51551% in March, which the BEA reports as a PCE price index increase of 0.5% in their tables….at the same time, Table 11 gives us a year over year PCE price index increase of 3.3% in March, up from 1.5% in February, and a core PCE price index increase, excluding food and energy, of 1.8% for the past year, both in line with the Fed's inflation target....applying the March inflation adjustment to the change in March PCE shows that real PCE was up 3.6329% in March, which BEA reports as a 3.6% increase in their press release and in the tables, following a February real PCE decrease of 1.2%...note that when those PCE price indexes are applied to a given month's annualized current dollar PCE, it yields that month's annualized real PCE in chained 2012 dollars, which aren't really dollar amounts at all, but merely the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....those results are shown in tables 7 and 8 of the PDF, where the quarterly figures given are identical to those shown in table 3 in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP...

March Durable Goods: New Orders Up 0.5%, Shipments Up 2.5%, Inventories Up 1.0%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for March (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $1.4 billion or 0.5 percent to $256.3 billion in March, after February's new orders were revised from the $254.0 billion reported last month to $254.9 billion, now down by 0.9% from January's new orders, revised from the 1.1% drop originally reported....however, with a 3.6% increase in January, year to date new orders are now up by 10.9% from those of 2020...

The volatile monthly new orders for transportation equipment limited this month’s orders increase, as new transportation equipment orders fell $1.4 billion or 1.7  percent to $81.9 billion, on a 46.9% decrease in new orders for commercial aircraft....excluding orders for transportation equipment, other new orders were up 1.6%, led by a $1.2 billion or 3.6 percent increase to $35.4 billion in new orders for fabricated metal products, while excluding just new orders for defense equipment, new orders rose 0.5%....at the same time, new orders for nondefense capital goods less aircraft, a category that’s a proxy for equipment investment, rose 0.9% to $73,211 million, led by a 4.3% increase in new orders for communications equipment...

Meanwhile, the seasonally adjusted value of March shipments of durable goods, which were ultimately included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, rose for the sixth time in seven months, increasing by $6.4 billion or 2.5 percent to $257.0 billion, after the value of February shipments was revised from $250.9 billion to $250.7 billion, now down 3.6% from January....higher shipments of transportation equipment led the March increase, increasing by $3.7 billion or 4.8 percent to $82.1 billion, on a 10.1% increase to $6,266 million in the value of shipments of commercial aircraft and on an 5.8% increase to $60,237 million in the value of shipments of motor vehicles and parts....meanwhile, the value of shipments of nondefense capital goods less aircraft rose 1.3% to $72,068 million, after the value of February’s capital goods shipments was revised down from $71,281 million to $71,168 million...

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $4.2 billion or 1.0 percent to $431.8 billion, after the value of end of February inventories was revised from $427.3 billion to $427.6 billion, still up 0.7% from January....the value of inventories of transportation equipment accounted for half of the March inventory increase, rising $2.1 billion or 1.4 percent to $149.0 billion, led by a 3.3% increase to $43,129 in inventories of motor vehicles and parts, while the value of all other inventories rose 0.8% to $282,821 million...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but often volatile new orders, rose for the 3rd consecutive month, after failing to rise over the prior ten, increasing by $4.4 billion or 0.4 percent to $1,087.7 billion, after the February unfilled orders increase was revised from $8.4 billion to $9.4 billion, now up 0.9% from January...a $2.3 billion or 2.8 percent increase to $83.0 billion in unfilled orders for fabricated metal products led the increase, while unfilled orders for transportation equipment orders were down $207 million, statistically a 0.0% change....the unfilled order book for durable goods is still 3.2% below the level of last March, with unfilled orders for transportation equipment now 8.2% below their year ago level, mostly on a 11.5% decrease in the backlog of orders for commercial aircraft....

 

(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, April 25, 2021

March new and existing home sales

There were just two widely watched reports released this past week; the March report on new home sales from the Census bureau, and the Existing Home Sales Report for March from the National Association of Realtors (NAR)….also released this week was the Chicago Fed National Activity Index (CFNAI) for March, a weighted composite index of 85 different economic metrics, which rose to +1.71 in March, up from –1.20 in February, after February's index was revised down from the –0.02 reported last month...as a result, the 3 month average of that index rose to +0.54 in March from a revised +0.07 in February, in an index where positive readings indicate that national economic activity has been above the historical trend over recent months...

This week also saw the release of another regional Fed manufacturing survey for April: the Kansas City Fed manufacturing survey for April, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to +31 in April, up from +26 in March, indicating a broad based expansion of that region's manufacturing....

New Home Sales Reported 20.7% Higher in March after Prior Months Revised Higher

The Census report on New Residential Sales for March (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 1,021,000 homes annually during the month, which was the highest sales rate since August 2006, 20.7 percent (±23.7 percent)* above the revised February annual sales rate of 846,000, and 66.8 percent (±36.7 percent) above the estimated annual rate that new homes were selling at during the initial Covid lockdowns in March of last year....the asterisk indicates that based on their small sampling, Census could not tell whether March new home sales rose or fell from home sales of February, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report, sales of new single family homes in February were revised from the annual rate of 775,000 reported last month to an annual rate of 846,000, and new home sales in January, initially reported at an annual rate of 923,000 and revised to a 948,000 annual rate last month, were revised up to a 1.010,000 a year rate with this report, while December's annualized new home sales rate, initially reported at an annual rate of 842,000 and revised from the initial revision of 885,000 to a 919,000 a year rate last month, were revised to a 949,000 rate with this release...

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 97,000 new single family homes sold in March, up from the estimated 70,000 new homes that sold in February and up from the 77,000 that sold in January...the raw numbers from Census field agents were further used to estimate that the median sales price of new houses sold in March was $330,800, down from the median sale price of $345,900 in February but up from the median sales price of $328,200 in March a year ago, while the average new home sales price was $397,800, uo from the $394,300 average sales price in February, and up from the average sales price of $375,400 in March a year ago....a seasonally adjusted estimate of 307,000 new single family houses remained for sale at the end of March, which represents a 3.6 month supply at the March sales rate, down from the 4.8 months of new home supply originally reported in February...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales Increase to 1,021,000 Annual Rate in March; Highest Since 2006. and A few Comments on March New Home Sales..

Existing Home Sales Decrease 3.7% in March on Record High Prices

The National Association of Realtors (NAR) reported that existing home sales fell at a 3.7% rate from February to March on a seasonally adjusted basis, projecting that 6.01 million existing homes would sell over an entire year if the March home sales pace were extrapolated over that year, a pace that was still 12.3% above the annual sales rate projected in March of a year ago....February homes sales, now reported at a 6.24 million annual rate, were revised from the 6.22 annual rate they reported a month ago....the NAR also reported that the median sales price for all existing-home types was at a record high $329,100 in March, which was 17.2% higher than the median sales price of $280,700 reported for March a year earlier, which they report "marks 109 straight months of year-over-year gains".....the NAR press release, which is titled "Housing Market Reaches Record-High Home Price and Gains in March", is in easy to read plain English, so if you're interested in a regional breakdown, or the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually happened during the month...this unadjusted data estimates that roughly 484,000 homes sold in March, up 33.2% from the 366,000 homes that sold in February, and up by 16.3% from the 416,000 homes that sold in March of last year, so we can see that it was just the effect of a large springtime seasonal adjustment that caused the headline to show a decrease....that same pdf indicates that the median home selling price for all housing types rose by 5.9%, from a revised $310,700 in February to $329,100 in March, while the average home sales price rose 3.8% to $355,200 from the $342,100 average sales price in February, and was up 12.2% from the $316,100 average home sales price of March a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, again see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Decreased to 6.01 million in March and Comments on March Existing Home Sales...

 

 

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

Sunday, April 18, 2021

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

Major monthly reports released this past week included the March Consumer Price Index from the Bureau of Labor Statistics, the March report on Industrial Production and Capacity Utilization from the Fed, and the Retail Sales report for March, the Business Sales and Inventories report for February, and the March report on New Residential Construction, all from the Census Bureau…the week also saw the release of the March Import-Export Price Index and the Regional and State Employment and Unemployment Summary for March, both from the Bureau of Labor Statistics; the latter report breaks down the two employment surveys from the monthly national jobs report by state and region....while the text of that report provides a useful summary of this data, the serious statistical aggregation can be found in the tables linked at the end of the report, where one can find the civilian labor force data and the change in payrolls by industry for each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands...

This week also saw first two regional Fed manufacturing surveys for April: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, an NYC suburban county in Connecticut, northern New Jersey, and Puerto Rico, reported their headline general business conditions index rose to +26.3, up from +17.4 in March, suggesting a broader expansion of First District manufacturing... meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose to +50.2 in April from +44.5 in March, the index’s highest reading in nearly 50 years, indicating that the great majority of the region's manufacturing firms reported increases in their activity this month...

CPI Rose 0.6% in March on Higher Prices for Energy and Transportation Services

The consumer price index rose 0.6% in March, the largest monthly increase since August 2012, as higher prices for fuel, utilities, transportation services, financial services, and used vehicles were only slightly offset by lower prices for clothing and for communication commodities...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.6% higher in March, after rising by 0.4% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.2% in September, 0.4% in August, by 0.5% in July and by 0.5% in June, but after falling by 0.1% last May, by 0.7% last April and by 0.3% in March of last year....the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 263.014 in February to 264.877 in March, which left it statistically 2.6198% higher than the 258.678 reading of March of last year, which is reported as a 2.6% year over year increase, up from the 1.7% year over year increase reported a month ago....with higher prices for energy a major factor in the overall index increase, seasonally adjusted core prices, which exclude food and energy, were only up by 0.3% for the month, as the unadjusted core price index rose from 270.696 to 271.713, which left the core index 1.6464% ahead of its year ago reading of 267.268, which is reported as a 1.6% year over year increase, up from the 1.3% year over year core price increase that was reported for February, but still little changed from the 1.6% the year over year core price increase that was reported for December of 2020...

The volatile seasonally adjusted energy price index rose 5.0% in March, after rising by 3.9% in February, 3.5% in January, 2.6% in December, 0.7% in November, 0.6% in October, 1.4% in September, 0.9% in August, 2.1% in July, and by 4.4% in June, but after falling by 2.3% in May, by 9.5% in April, and by 5.8% last March, and hence is now 13.2% higher than in March a year ago...the price index for energy commodities was 8.9% higher in March, while the index for energy services was 0.6% higher, after rising 0.9% in February....the energy commodity index was up 8.9% on a 9.1% increase in the price of gasoline and a 3.2% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.5% lower...within energy services, the price index for utility gas service rose 2.5% after rising 1.6% in February and is now 9.8% higher than it was a year ago, while the electricity price index was unchanged in March after rising 0.7% in February....energy commodities are now averaging 22.0% higher than their year ago levels, with gasoline price averaging 22.5% higher than they were a year ago, while the energy services price index is now up 4.1% from last March, as electricity prices are also 2.5% higher than a year ago…

The seasonally adjusted food price index rose 0.1% in March, after rising by 0.2% in February, 0.1% in January and 0.3% in December, after being unchanged in November, rising 0.2% in October, rising 0.1% in August and in September, after falling 0.3% last July, rising 0.5% last June, rising 0.7% last May and 1.4% last April, and by 0.3% last March, as the price index for food purchased for use at home was 0.1% higher in March, after rising 0.3% in February, while the index for food bought to eat away from home was also 0.1% higher, as average prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.2%, while food prices at employee sites and schools averaged 13.3% lower...notably, the price index for food at elementary and secondary schools was down 16.3% and is now down 43.5% from a year ago...

In the food at home categories, the price index for cereals and bakery products was 0.1% lower even as average bread prices rose 0.2%, as the price index for fresh biscuits, rolls, muffins fell 1.2%, the price index for crackers and bread and cracker products fell 1.2% and the price index for fresh sweetrolls, coffeecakes, doughnuts fell 1.0%....on the other hand, the price index for the meats, poultry, fish, and eggs food group was 0.1% higher, as the price index for poultry rose 0.9%, the price index for pork rose 1.0%, the price index for fresh fish and seafood rose 1.3%, and egg prices rose 2.0%...meanwhile, the seasonally adjusted price index for dairy products was 0.5% lower, as milk prices fell 0.5% and the price index for dairy products other than cheese and ice cream was 0.9% lower....however, the fruits and vegetables price index was 1.0% higher as the price index for fresh fruits rose 0.9%, the price index for fresh vegetables rose 1.4%, and the price index for dried beans, peas, and lentils rose 2.8%....meanwhile, the beverages price index was 0.2% lower as the price index for nonfrozen noncarbonated juices and drinks fell 1.8% and the price index for coffee fell 0.7%....lastly, the price index for the ‘other foods at home’ category was unchanged, as the price index for sugar and sweets rose 0.4% and the price index for snacks rose 0.6%, while the price index for fats and oils fell 0.4% and the price index for prepared salads fell 1.7%...the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last March, the only food line items showing a price change greater than 10% over the past year are beef roasts, which are 11.2% higher, and the index for pork roasts, steaks, and ribs, which has risen 10.5%...

Among the seasonally adjusted core components of the CPI, which rose 0.3% in March after rising 0.1% in February, being unchanged in January and December, after rising by 0.2% in November, by 0.1% in October, by 0.2% in September, by 0.3% in August, by 0.5% in July and by 0.2% in June, after falling by 0.1% in May, by 0.4% in April and being unchanged in March of last year, the composite price index of all goods less food and energy goods was 0.1% higher in March, while the more heavily weighted composite for all services less energy services was 0.4% higher....

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust March retail sales for inflation in national accounts data, the price index for household furnishings and supplies was was 0.4% higher,  as the price index for major appliances rose 1.9%, the price index for living room, kitchen, and dining room furniture rose 2.4%, and the price index for tools, hardware and supplies rose 1.6%....however, the apparel price index was 0.3% lower on a 1.7% decrease in the price index for men's suits, sport coats, and outerwear, a 4.1% decrease in the price index for women's suits and separates, a 5.6% decrease in the price index for girls' apparel, and a 3.1% decrease in the price index for boys' and girls' footwear....meanwhile, the price index for transportation commodities other than fuel was 0.2% higher, as prices for new cars and trucks were unchanged, prices for used cars and trucks rose 0.5%, and the price index for vehicle parts and equipment other than tires was 2.4% higher... at the same time, the price index for medical care commodities 0.1% higher, as prescription drug prices were unchanged while nonprescription drug prices rose 0.2%...on the other hand, the recreational commodities index was 0.2% lower on a 0.6% decrease in TV prices, a 1.3% decrease in the price index for sporting goods, a 1.8% decrease in the price index for photographic equipment and supplies, and a 1.6% decrease in the price index for recreational books...in addition, the education and communication commodities index was 1.8% lower on a 2.3% decrease in the price index for educational books and supplies, a 2.0% decrease in the price index for computers, peripherals, and smart home assistants, and a 0.9% 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 up 0.2% on a 0.4% increase in the price index for miscellaneous personal goods and a 0.6% increase in cigarette prices...

Within core services, the price index for shelter was 0.3% higher as rents rose 0.2% and homeowner's equivalent rent was 0.2% higher, and as prices for lodging away from home at hotels and motels rose 4.4%, 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 0.1% higher....meanwhile, the price index for medical care services was 0.1% higher, as the price index for outpatient hospital services rose 0.7% and the price index for inpatient hospital services rose 0.5%....at the same time, the transportation services price index was 1.8% higher as car and truck rentals rose 11.7%, the price index for intracity mass transit rose 2.7%, and the price index for vehicle insurance rose 3.3%...in addition, the recreation services price index rose 0.8% as the index for admission to movies, theaters, and concerts rose 1.1% and the price index for admissions to sporting events rose 4.7%.... on the other hand, the index for education and communication services was unchaged as the price index for delivery services rose 1.0% while the price index for day care and preschool services fell 0.8% and the price index for wireless telephone services fell 0.3%...lastly, the index for other personal services was up 0.9% as the price index for checking accounts and other bank services rose 13.0% while the price index for haircuts was 0.4% higher...

Among core line items, the price index for telephone hardware, calculators, and other consumer information items, which is now down by 18.0% since last March, the price index for men's suits, sport coats, and outerwear, which is also down 18.0% from a year ago, the price index for women's dresses, which has fallen by 11.4% in the past year, the price index for admission to sporting events, which is still down by 11.9% from a year ago, and airline fares, which are still down by 15.1% since last March, have all seen prices drop by more than 10% over the past year, while the price index for car and truck rental, which has now risen 31.2% from a year ago, and the price index for laundry equipment, which is up 24.2% from last March, are the only core line items to have increased by a double digit magnitude over that span....

Retail Sales Rose 9.8% in March as Consumers Spent Stimulus Checks

Seasonally adjusted retail sales increased by 9.8% in March, the second largest jump on record, after retail sales for January and February were both revised higher...the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled a record high $619.1 billion during the month, which was up by 9.8 percent (±0.5%) from February's revised sales of $529.3 billion and 27.7 percent (±0.7 percent) above the adjusted sales in March of last year... February's seasonally adjusted sales were revised from $561.7 billion to $563.7 billion, while January's sales were revised from $579.1 billion to $579.552 billion; as a result, the percent change from January to February was revised from down 3.0 percent (±0.5 percent) to down 2.7 percent (±0.2 percent)....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were actually up 27.3%, from $493,085 million in February to $627,885 million in March, while they were up 30.4% from the $481,513 million of sales in March of a year ago...

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the March Census Marts pdf....the first double column of this table shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month's March "advance" report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called "preliminary") as of this report, with the new January to February percentage change under "Jan 2021 r" (revised) and the February 2020 to February 2021 percentage change as revised in the 2nd column of that pair...(for your reference, our copy of this same table from the advance February estimate, before this month's revisions, is here).... lastly, the third pair of columns shows the percentage change of the first 3 months of this year's sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of the 1st quarter a year ago....as you can see from that fifth column, overall retail sales for the 1st quarter of 2021 were roughly 7.7% higher than the 4th quarter of 2019, which implies that nominal personal consumption of goods for the 1st quarter will be up by roughly the same amount, before any inflation adjustments…

March 2021 retail sales table

To compute March's real personal consumption of goods data for national accounts from this March retail sales report, the BEA will use the corresponding price changes from the March consumer price index, which we just reviewed...to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals...from the third line on the above table, we can see that March retail sales excluding the 10.9% price-related increase in sales at gas stations were up by 9.7%....then, removing the 0.7% increase in grocery & beverage sales and the 13.4% increase in food services sales out from that total, we find that core retail sales were up by almost 10.9% for the month...since the March CPI report showed that the the composite price index of all goods less food and energy goods was 0.1% higher in March, we can thus figure that real retail sales excluding food and energy will show an increase of around 10.8%...however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at sporting goods and other recreational commodity stores were up 23.5%, the March price index for transportation commodities other than fuel was 0.2% lower, which would mean that real unit sales at sporting goods and other recreational commodity stores were probably on the order of 26.4% higher, once the price increase is taken into account... similarly, while nominal sales at clothing stores were 18.3% higher in March, the apparel price index was 0.3% lower, which means that real sales of clothing likely rose around 18.6%...on the other hand, while sales at furniture and home furnishing stores were 5.9% higher, the price index for household furnishings and supplies was was 0.4% higher, which means real sales of furniture and home furnishings only rose by around 5.5%..

In addition to figuring those core retail sales, we should adjust food and energy retail sales for their price changes separately, just as the BEA will do…the March CPI report showed that the food price index was 0.1% higher, as the price index for food purchased for use at home rose 0.1% while the index for food bought away from home was also 0.1% higher, as prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.2%...hence while nominal sales at food and beverage stores were 0.7% higher, real sales of food and beverages would be around 0.6% higher in light of the 0.1% higher prices…on the other hand, the 13.4% increase in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants rose around 13.0% during the month...and while sales at gas stations were up 10.9%, there was a 9.1% increase in price of gasoline during the month, which would suggest that real sales of gasoline were up on the order of 1.6% or 1.7%, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices, so the actual increase in real sales at gas stations was likely greater...reweighing and averaging the real sales changes that we have thus estimated back together, and excluding food services, we can then estimate that the income and outlays report for March will show that real personal consumption of goods rose by around 8.9% in March, after falling by a revised 2.9% in February and rising by a revised 7.8% in January...at the same time, the 13.0% increase in real sales at bars and restaurants would boost March real personal consumption of services by more than 1%...

Now that we have estimates of the percentage change in PCE goods for all three months of the first quarter, we can also estimate the contribution that PCE goods will make to 1st quarter GDP.... the February income and outlays report gives the change in real PCE goods for the 4th quarter months as unchanged in October, down 1.2% in November, and down 2.2% in December…based on the revisions to retail sales in the March retail report, we now have PCE goods for January at +7.8%, PCE goods for February at -2.9%, and PCE goods for March at +8.9%…to simplify our calculations, we’ll now convert perfcentage changes in PCE goods into an index, and set October with an index value of 100.00…thus Nov = 98.80, Dec = 96.63, Jan = 104.17, Feb = 101.15, and March = 110.15…hence, to figure out the growth rate of 1st quarter PCE goods, we have this calculation ( ((104.17 + 101.15 + 110.15) / 3)/ ((100 + 98.8 + 96.63)/ 3)) ^ 4  = 1.30021  …that means that PCE goods rose at about a 30.0% annual rate in the 1st quarter…since PCE goods has usually been around 23% of GDP, that means the contribution of PCE goods alone to first quarter GDP will be around 6.90 percentage points…

Industrial Production Rose 1.4% in March After February Output Revised 0.6% Lower

The Fed's G17 release on Industrial production and Capacity Utilization for March reported that industrial production rose 1.4% in March after falling by a revised 2.6% in February, which left production 1.0% higher than a year ago... the industrial production index, with the benchmark set for average 2012 production to be equal to 100.0, ended at 105.6 in March, up from an February index reading that was revised down from 104.7 to 104.1, after the January index was revised down from 107.1 to 106.9, which caused the February decrease to be revised from 2.2% down to 2.6%...meanwhile December index was revised up from 105.8 to 105.9, the November index was unrevised at 104.8, and the October was revised from 103.8 to 103.9...as a result of those revisions and the March increase, US industrial production was up at a 2.5% annual rate for the first quarter as a whole...

The manufacturing index, which accounts for around 77% of the total IP index, rose to 102.8 in March from a revised 100.0 in February, which had previously been reported at 100.7... that came after the January manufacturing index was revised from 103.8 to 103.9, the December manufacturing index was left unrevised at 102.6, and the November manufacturing index was revised from 101.8 to 101.9....after revisions, the manufacturing index now sits 3.1% above its year ago level, while first quarter manufacturing has grown at a 2.7% annual rate from that of the 4th quarter of 2019....meanwhile, the mining index, which includes oil and gas well drilling, rose 5.7%, from 112.8 in February to 119.2 in March, after the February mining index was revised up from last month's reported 112.6, which still left the mining index 8.8% below where it was a year earlier...finally, the utility index, which typically fluctuates due to deviations from normal temperatures, fell by 11.4% in March, from 111.5 to 98.8, after the February utility index was revised from 112.5 to 111.5, now up 9.2% from January...including this month's revisions, the utility index is still only 0.2% below that of a year ago, as last March was also much warmer than normal...

This report also includes capacity utilization data, which is expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 74.4% in March from 73.4% in February, which was revised down from the 73.8% utilization reported a month ago...capacity utilization of NAICS durable goods production facilities rose from a revised 71.3% in February to 73.5% in March, while capacity utilization for non-durables producers was up from 73.5% to 75.4%...capacity utilization for the mining sector rose to 82.2% in March from 77.7% in February, which had been reported as 77.5% last month, while utilities were operating at 68.8% of capacity during March, down from 77.8% in February, while the February utility index was revised down from the previously reported 78.5%...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..  

February Business Sales Down 1.9%, Business Inventories Up 0.5%

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

According to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,549.6 billion in February, down 1.9 percent (±0.3 percent) from January's revised sales, but still up 5.7 percent (±0.4 percent) from February sales of a year earlier...January's sales were revised from the originally reported $1,568.5 billion to $1,579,238 million, now a 4.5% increase from December....the seasonally adjusted value of manufacturer's sales fell 2.0% to $502,400 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, fell 2.8% to $508,904 million, while wholesale sales fell 0.8% to $538,303 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,010.8 billion at the end of February, up 0.5 percent (±0.1%) from the end of January, but 0.7 percent (±0.4 percent) lower than in February a year earlier...at the same time, the value of end of January inventories was revised from the $1,982.4 billion reported last month to $2,000.7 billion, now 0.4% higher than December....seasonally adjusted inventories of manufacturers were estimated to be valued at $702,441 million, up 0.8% from January, and inventories of retailers were valued at $625,903 million, statistically unchanged January, while inventories of wholesalers were estimated to be valued at $682,470 million at the end of February, 0.6% higher than in January...

For GDP purposes, all those inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for February, which was up by 1.4% for finished goods...last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those declining real inventories would have a significant negative impact on 1st quarter GDP...also last week, we found that February's wholesale inventories decrease would have a negative impact on 1st quarter GDP....with a 1.4% increase in prices, real retail inventories will fall by around 0.6% in February, after falling around 1.8% in January, following a large increase in real retail inventories in the fourth quarter...hence the real retail inventory decrease in the 1st quarter will not only reverse that 4th quarter increase, but also subtract from the growth of GDP by the size of the 1st quarter real inventory decrease...

March Housing Starts at a 14 Year High; Building Permits Also Higher

The March report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,739,000 in March, which was the highest rate since June 2006, 19.4 percent (±13.7 percent) above the revised estimated annual rate of 1,457,000 starts in February, and was also 37.0 percent (±15.2 percent)* above last March's pandemic hit annual rate of 1,269,000 starts....the figures in parenthesis represent the most likely range of the change indicated; in other words, March housing starts could have been up by as much as 33.1% from those of last March, or up just by 5.7%, with revisions of a greater magnitude in either direction still possible...in this report, the annual rate for February housing starts was revised from the 1,421,000 reported last month to 1,457,000, while January starts, which were first reported at a 1,580,000 annual rate, were revised from last month's initial revised figure of 1,584,000 annually to a 1,642,000 annual rate with this report....

These annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 144,400 housing units were started in March, up from the 103,100 units that were started in February and the 115,200 units that were started in January...of those housing units started in March, an estimated 103,700 were single family homes and 38,800 were units in structures with more than 5 units, up from the revised 74,800 single family starts in February and down from the 27,000 units started in structures with more than 5 units in February...

The monthly data on new building permits, with a smaller margin of error, are usually a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in March, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,766,000, which was 2.7 percent (±1.7 percent) above the revised February rate of 1,720,000 permits, and was 30.2 percent (±1.8 percent) above rate of building permit issuance in March a year earlier...the annual rate for housing permits issued in February was revised up from the originally reported 1,682,000, as apparently last month's data collection was hampered by the deep freeze....

Again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 158,300 housing units were issued in March, up from the revised estimate of 120,100 new permits issued in February...of those permits issued in March, 110,800 were permits for single family homes and 42,100 were permits for units in structures of more than 5 units, up from the 81,100 single family permits in February, and up from the 35,600 permits for units in structures of more than 5 units... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.739 Million Annual Rate in March and Comments on March Housing Starts...

 

(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, April 11, 2021

March producer prices; February’s trade deficit, job openings survey, factory inventories, & wholesale trade

Major monthly reports released over the past week included the Commerce Department's report on our International Trade for February, the Producer Price Index for March and the Job Openings and Labor Turnover Survey (JOLTS) for February, both from the Bureau of Labor Statistics, and the Full Report on Manufacturers' Shipments, Inventories and Orders for February, and the February report on Wholesale Trade, Sales and Inventories, both from the Census Bureau....in addition, the Fed released the Consumer Credit Report for February, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $27.6 billion, or at a 7.9% annual rate, the most since late 2017, as non-revolving credit expanded at a 7.3% annual rate to $3,231.4 billion and revolving credit outstanding grew at a 10.1% rate to $974.4 billion...

Privately issued reports released this week included the March 2021 Services Report On Business® from the Institute for Supply Management, which saw the ISM Services index rise to an all-time high of 63.7% in March, up from 55.3% in February, indicating a much larger plurality of service industry purchasing managers reported expansion in various facets of their business in March, and the Mortgage Monitor for February (pdf) from Black Knight Financial Services, which indicated that 6.00% of all mortgages were delinquent in February, up from 5.85% in January, and up from 3.28% in February of 2020, and that a record low of 0.32% of all mortgages were in the foreclosure process, unchanged from the 0.32% that were in foreclosure in January but down from the 0.45% of mortgages that were in foreclosure a year earlier...

US Trade Deficit Rises 4.8% in February to Record High

Our trade deficit rose 4.8% February, as both our exports and imports decreased, but the value of our exports fell by almost three times as much as the value of our imports did....the Commerce Department report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit rose by $3.3 billion to $71.1 billion in February, from a January deficit that was revised down to $67.8 billion from the $68.2 billion deficit reported a month ago...in rounded figures, the value of our February exports fell by $5.0 billion to $187.3 billion on $4.8 billion decrease to $131.1 billion in our exports of goods and a $0.2 billion decrease to $56.1 billion in our exports of services, while our imports fell $1.7 billion to $258.3 billion as a $2.0 billion decrease to $219.1 billion in our imports of goods was partially offset by a $0.3 billion increase to $39.2 billion in our imports of services....export prices averaged 1.6% higher in February, which means our real exports month over month fell more than the nominal decrease by that percentage, while import prices rose 1.3%, meaning that the contraction in real imports was greater than the nominal decrease reported here by that percentage...

The decrease in our February exports of goods resulted from lower exports of capital goods, consumer goods, soybeans, and of automotive vehicles, parts and engines...referencing the Full Release and Tables for February (pdf), in Exhibit 7 we find that our exports of capital goods fell by $2,451 million to $39,094 million on a $738 million decrease in our exports of industrial machines other than those itemized separately, a $459 million decrease in our exports of civilian aircraft, and a $409 million decrease in our exports of semiconductors, and that our exports of consumer goods fell by $937 million to $15,049 million on a $470 million decrease in our exports of gem diamonds; in addition, our exports of foods, feeds and beverages fell by $727 million to $13,166 million on a $889 million decrease in our exports of soybeans, and our exports of automotive vehicles, parts, and engines fell by $703 million to $11,899 million on a $319 million decrease in our exports of parts and accessories of vehicles other than tires, engines and chassis and a $280 million decrease in our exports of new and used passenger cars, while our exports in other goods not categorized by end use fell by $372 million to $4,968 million....partially offsetting the decreases in those end use categories, our exports of industrial supplies and materials rose by $352 million to $46,448 million as a $2,399 million increase in our exports of natural gas and a $503 million increase in our exports of non-monetary gold were partly offset by a $824 million decrease in our exports of crude oil, a $326 million decrease in our exports of plastic materials, and a $357 million decrease in our exports of natural gas liquids...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and shows that lower imports of automotive vehicles, parts, and engines and of consumer goods were responsible for the $2.0 billion decrease in our February imports, while their impact was partly offset by greater imports of industrial supplies and materials...our imports of automotive vehicles, parts and engines fell by $3,393 million to $28,184 million on a $1,768 million decrease in our imports of passenger cars, a $633 million decrease in our imports of trucks, buses, and special purpose vehicles, and a $589 million decrease in our imports of parts and accessories of vehicles other than tires, engines and chassis, and our imports of consumer goods fell by $2,674 million to $60,665 million as a $3,876 million decrease in our imports of pharmaceuticals and a $438 million decrease in our imports of household appliances were partially offset by a $737 million increase in our imports of artwork, antiques, and other collectibles...in addition, our imports of foods, feeds, and beverages fell by $669 million to $13,116 million on decreases in most food & feed categories and a $285 million decrease in imports of foods other than those itemized separately...partially offsetting the decreases in those end use categories, our imports of industrial supplies and materials rose by $3,531 million to $46,586 million on a $1,056 million increase in our imports of finished metal shapes, a $963 million increase in our imports of crude oil, an $874 million increase in our imports of natural gas, a $535 million increase in our imports of precious metals other than those itemized, and a $395 million increase in our imports of petroleum products other than those itemized, and our imports of capital goods rose by $159 million to $57,707 million as a $951 million increase in our imports of civilian aircraft was partly offset by a $420 million increase in our imports of computers, and lastly our imports of other goods not categorized by end use rose by $924 million to $9,483 million...

The press release for this month's report summarizes Exhibit 19 in the full release pdf for February, which gives us surplus and deficit details on our goods trade with selected countries:

The February figures show surpluses, in billions of dollars, with South and Central America ($3.7), Brazil ($1.4), Hong Kong ($1.2), Singapore ($0.6), United Kingdom ($0.2), and Saudi Arabia ($0.1). Deficits were recorded, in billions of dollars, with China ($30.3), European Union ($19.0), Mexico ($6.8), Germany ($5.3), Japan ($4.5), Canada ($4.0), Italy ($3.2), France ($2.7), Taiwan ($2.4), South Korea ($2.3), and India ($1.7).

  • The deficit with China increased $3.1 billion to $30.3 billion in February. Exports decreased $4.5 billion to $10.4 billion and imports decreased $1.5 billion to $40.6 billion.
  • The deficit with Canada increased $2.2 billion to $4.0 billion in February. Exports decreased $0.5 billion to $23.7 billion and imports increased $1.7 billion to $27.7 billion.
  • The deficit with Mexico decreased $5.1 billion to $6.8 billion in February. Exports increased $2.1 billion to $22.8 billion and imports decreased $3.0 billion to $29.6 billion.

To gauge the impact of January and February trade on 1st quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2012 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that the amounts are not annualized here....from that table, we can figure that the 4th quarter’s real exports of goods averaged 145,373.7 million monthly in chained 2012 dollars, while inflation adjusted 1st quarter goods exports were at 147,294 million and 139,441 million for January and February respectively in that same 2012 dollar quantity index representation...averaging January’s and February’s goods exports and then computing the annualized change between that average and the average of the fourth quarter, we find that the 1st quarter's real exports of goods are running at a 5.4068% annual rate below those of the 4th quarter, or at a pace that would subtract about 0.33 percentage points from 1st quarter GDP..... in a similar manner, we find that our 4th quarter real imports of goods averaged 239,602.7 million monthly in chained 2012 dollars, while inflation adjusted January and February imports were at 243,409 million and 238,534 million respectively, after that same 2012 chained dollars inflation adjustment...that would indicate that so far in the 1st quarter, our real imports of goods have increased at a 2.305% annual rate from those of the 4th quarter...since increases in imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 2.3% rate would subtract about 0.26 percentage points from 1st quarter GDP....hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to subtract around 0.59 percentage points from 1st quarter GDP...

Note that we have not computed the impact of the usually less volatile change in services here because the Census does not provide inflation adjusted data on those, but that the $0.2 billion decrease in exports of services and the $0.3 billion increase in imports of services both suggest that February’s trade in services would also be a subtraction from 1st quarter GDP, after the change January's exports and imports in services were statistically equal...

Producer Prices rose 1.0% in March on Higher Wholesale Energy Prices, Wider Margins for Trade and Transport Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 1.0% in March, as prices for finished wholesale goods rose 1.7% while margins of final services providers rose 0.7%...that increase followed a February report that the PPI was 0.5% higher, with prices for finished wholesale goods on average 1.4% higher, while margins of final services providers increased by 0.1%, a January report that had the PPI 1.3% higher, with average prices for finished wholesale goods rising 1.4%, while margins of final services providers increased by 1.3%, a now revised December report that indicated the PPI was up 0.3%, with prices for finished wholesale goods up 1.0% while margins of final services providers were 0.2% lower, and a re-revised November report that shows the PPI was unchanged, with prices for finished wholesale goods rising 0.4% while margins of final services providers decreased 0.2%....on an unadjusted basis, producer prices are now 4.2% higher than a year ago, up from the 2.8% 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 0.6% for the month, and is now 3.1% higher than in March a year ago, up from the 2.2% year over year increase as was shown in February...

As noted, the price index for final demand for goods, aka 'finished goods', was 1.7% higher in March, after being 1.4% higher in February, 1.4% higher in January, 1.0% higher in December, 0.4% higher in November, 0.5% higher in October, 0.4% higher in September, 0.4% higher in August, 0.5% higher in July, 0.4% higher in June, and 1.4% higher in May, but 2.8% lower in April and 1.7% lower in March of last year....the finished goods price index rose 1.7% in February because the price index for wholesale energy goods was 5.9% higher, after it had risen by 6.0% in February, 5.1% in January, 4.7% in December, 1.7% in November, and by 0.5% in October, while the price index for wholesale foods rose 0.5%, after rising by 1.3% in February, rising 0.2% in January, after being unchanged in December and rising by a revised 0.2% in November, and while the index for final demand for core wholesale goods (excluding food and energy) was 0.9% higher, after it had risen by 0.3% in February and 0.8% in January....wholesale energy prices averaged 5.9% higher due to a 8.8% increase in wholesale prices for gasoline and a 16.5% increase in wholesale prices for No.2 diesel fuel, while, the wholesale food price index rose 0.5% on a 10.3% increase in the wholesale price index for eggs for fresh use, a 6.0% increase in the wholesale price index for pork, and a 7.7% increase in wholesale price index for fin-fish and shellfish....among core wholesale goods, the wholesale price index for industrial chemicals rose 9.1%, the wholesale price index for mobile homes rose 2.5%, and the wholesale price index for iron and steel scrap rose 10.8% ..

At the same time, the index for final demand for services rose 0.7% in March, after rising 0.1% in February and 1.3% in January, after falling by 0.2% in December and in November, as the index for final demand for trade services rose 1.0%, the index for final demand for transportation and warehousing services rose 1.5%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.4% higher...among trade services, seasonally adjusted margins for machinery and vehicle wholesalers rose 6.7%, margins for apparel, jewelry, footwear, and accessories retailers rose 5.8%, margins for TV, video, and photographic equipment and supplies retailers rose 6.8%, and margins for food retailers rose 1.1%, while margins for automobile retailers fell 4.7%.. among transportation and warehousing services, average margins for truck transportation of freight rose 1.7%, average margins for air transportation of freight rose 1.2%, and average margins for rail transportation of freight and mail rose 1.1%...among the components of the core final demand for services index, the index for portfolio management rose 1.6%, the index for passenger car rental rose 9.6%, and margins for residential property sales and leases, brokerage fees and commissions rose 1.7%, while margins for arrangement of cruises and tours fell 3.0%…

This report also showed the price index for intermediate processed goods rose 4.0% in March, after rising 2.7% in February, 1.7% in January, a revised 1.2% in December, a revised 0.9% in November, 0.9% in October, 0.6% in September, 0.9% in August, 1.4% in July, and 1.2% in June, but after being unchanged in May and falling the prior 5 months....the price index for intermediate energy goods rose 8.8%, as refinery prices for gasoline rose 8.8%, refinery prices for No. 2 diesel fuel rose 16.5%, refinery prices for jet fuel rose 12.6%, producer prices for industrial electric power rose 9.5%, and producer prices for industrial natural gas rose 8.5%... meanwhile, the price index for intermediate processed foods and feeds rose 0.9%, as the producer price index for fats and oil rose 3.1%, the producer price index for processed poultry rose 3.9%, and the producer price index for prepared animal feeds rose 1.0%...at the same time, the core price index for intermediate processed goods less food and energy rose 3.2% as the producer price index for plastic resins and materials rose 9.1%, the producer price index for phosphates rose 20.4%, the producer price index for steel mill products rose 17.6%, the producer price index for plywood rose 10.5%, and the producer price index for hardwood lumber rose 9.0%...prices for intermediate processed goods are now 12.5% higher than in March a year ago, the fourth increase after 19 consecutive year over year decreases, which followed 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 9.3% in March, after rising 4.3% in February, 3.8% in January, a revised 2.3% in December, a revised 6.3% in November, and after rising by 1.3% in October, 5.2% in September, 4.0% in August, 0.6% in July, 5.4% in June and 8.4% in May, but after falling 13.7% in April, and by 8.1% last March ....that was as the March price index for crude energy goods rose 22.3% as crude oil prices rose 11.0%, unprocessed natural gas prices rose 46.6%, and coal prices were unchanged, while the price index for unprocessed foodstuffs and feedstuffs rose 1.4% on a 17.0% increase in the price of slaughter hogs, and a 5.3% increase in producer prices for alfalfa hay....at the same time, the index for core raw materials other than food and energy materials rose 3.2%, as the price index for copper base scrap rose 11.1% and the price index for iron and steel scrap rose 10.8%... this raw materials index is now 41.6% higher than a year ago, just the fifth annual increase in more than 2 years, as the year over year change on this index had been negative from the beginning of 2019 through October of last year...

Lastly, the price index for services for intermediate demand rose 0.4% in March, after rising 0.7% in February, 1.3% in January, and a revised 0.2% in December, after being unchanged  in November, rising 0.7% in October, rising 1.1% in September, 0.8% in August, 0.5% in July, and 0.3% last June….the price index for intermediate trade services was 0.4% higher, as margins for intermediate building materials, paint, and hardware wholesalers rose 3.6%, margins for intermediate paper and plastics products wholesalers rose 3.9%, and margins for intermediate hardware, building material, and supplies retailers rose 2.1%...meanwhile, the index for transportation and warehousing services for intermediate demand was 0.9% higher, as the intermediate price index for water transportation of freight rose 3.3%, the intermediate price index for truck transportation of freight rose 1.7%, and the intermediate price index for arrangement of freight and cargo rose 2.9%....at the same time, the core price index for intermediate services other than trade, transportation, and warehousing services rose 0.3%, as the intermediate price index for business loan services (partial) rose 6.2%, the intermediate price index for passenger car rental rose 9.6%, the intermediate price index for investment banking rose 4.4%, and the intermediate price index for advertising space sales in periodicals and newspapers rose 1.8%, while the intermediate price index for truck, utility trailer, and RV rental and leasing fell 2.6%..over the 12 months ended in March, the year over year price index for services for intermediate demand is 4.0% higher than it was a year ago, the seventh consecutive positive annual change since it briefly turned negative year over year from April to August for the first time in the history of this index...

Job Openings, Hiring, Layoffs & Job Quitting were all Higher in February

The Job Openings and Labor Turnover Survey (JOLTS) report for February from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 268,000, from 7,099,000 in January to 7,367,000 in February, after January’s job openings were revised up from the originally reported 6,917,000...February's jobs openings were also 5.1% higher than the 7,012,000 job openings reported in February a year ago, as the job opening ratio expressed as a percentage of the employed rose from 4.7% in January to 4.9% in February, which was also up from the 4.4% rate of February a year ago...the healthcare and social assistance sector, with a 233,000 job opening increase to 1,453,000 openings, saw the largest increase, while job openings in state and local education decreased by 117,000 to 177,000  (details on job openings by industry and region can be viewed in Table 1)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in February, seasonally adjusted new hires totaled 5,738,000, up by 273,000 from the revised 5,465,000 who were hired or rehired in January, as the hiring rate as a percentage of all employed rose from 3.8% in January to 4.0% in February, which was also up from the 3.9% hiring rate in February a year earlier (details of hiring by sector since October and for a year ago are in table 2)....meanwhile, total separations rose by 133,000, from 5,323,000 in January to 5,456,000 in February, as the separations rate as a percentage of the employed rose from 3.7% in January to 3.8% in February, and was also up from 3.7% in February a year ago (see details in table 3)...subtracting the 5,456,000 total separations from the total hires of 5,738,000 would imply an increase of 288,000 jobs in February, somewhat less than the revised payroll job increase of 468,000 for February reported in the March 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 founds that 3,357,000 of us voluntarily quit our jobs in February, up by 51,000 from the revised 3,306,000 who quit their jobs in January, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.3% of total employment, which was still up from the quits rate of 2.2% year earlier (see details in table 4)....in addition to those who quit, another 1,775,000 were either laid off, fired or otherwise discharged in February, also up by 51,000 from the revised 1,724,000 who were discharged in January, as the discharges rate remained at 1.2% of all those who were employed during the month, while it was down from the 1.3% discharges rate of a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 323,000 in February, up from 294,000 in January, for an 'other separations rate’ of 0.2%, same as in January and the same as in February of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and  on job quits and discharges can be accessed using the links to tables at the bottom of the press release...  

February Factory Shipments Down 2.0%, Factory Inventories 0.8% Higher

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for February from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods decreased by $4.1 billion or 0.8 percent to $505.7 billion in February, the first decrease in 10 months, following a revised 2.7% increase to $509.7 billion in January, which was originally reported as a 2.6 percent increase to $509.4 billion a month ago....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only accurate as revised updates to the February advance report on durable goods which was released two weeks ago...on those durable goods revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in February, down following nine consecutive monthly increases, decreased $4.1 billion or 0.8 percent to $505.7 billion, the U.S. Census Bureau reported today. This followed a 2.7 percent January increase. Shipments, also down following nine consecutive monthly increases, decreased $10.3 billion or 2.0 percent to $502.4 billion. This followed a 1.8 percent January increase. Unfilled orders, up two consecutive months, increased $8.5 billion or 0.8 percent to $1,082.3 billion. This followed a 0.2 percent January increase. The unfilled orders-to-shipments ratio was 6.29, up from 6.11 in January. Inventories, up six of the last seven months, increased $5.5 billion or 0.8 percent to $702.4 billion. This followed a 0.2 percent January increase. The inventories-to-shipments ratio was 1.40, up from 1.36 in January. 
  • New orders for manufactured durable goods in February, down following nine consecutive monthly increases, decreased $3.2 billion or 1.2 percent to $254.1 billion, down from the previously published 1.1 percent decrease. This followed a 3.6 percent January increase. Transportation equipment, down following five consecutive monthly increases, led the decrease, $1.5 billion or 1.8 percent to $83.4 billion. New orders for manufactured nondurable goods decreased $0.9 billion or 0.4 percent to $251.6 billion.
  • Shipments of manufactured durable goods in February, down following five consecutive monthly increases, decreased $9.4 billion or 3.6 percent to $250.8 billion, down from the previously published 3.5 percent decrease. This followed a 1.8 percent January increase. Transportation equipment, also down following five consecutive monthly increases, led the decrease, $7.1 billion or 8.3 percent to $78.5 billion. Shipments of manufactured nondurable goods, down following nine consecutive monthly increases, decreased $0.9 billion or 0.4 percent to $251.6 billion. This followed a 1.8 percent January increase. Chemical products, also down following nine consecutive monthly increases, led the decrease, $0.8 billion or 1.1 percent to $71.1 billion.
  • Unfilled orders for manufactured durable goods in February, up two consecutive months, increased $8.5 billion or 0.8 percent to $1,082.3 billion, unchanged from the previously published increase. This followed a 0.2 percent January increase. Transportation equipment, up following eleven consecutive monthly decreases, led the increase, $5.0 billion or 0.7 percent to $711.1 billion.
  • Inventories of manufactured durable goods in February, up following two consecutive monthly decreases, increased $2.8 billion or 0.7 percent to $427.3 billion, unchanged from the previously published increase. This followed a 0.3 percent January decrease. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $0.9 billion or 0.6 percent to $146.6 billion. Inventories of manufactured nondurable goods, up six of the last seven months, increased $2.7 billion or 1.0 percent to $275.1 billion. This followed a 0.9 percent January increase. Petroleum and coal products, up four consecutive months, led the increase, $1.9 billion or 5.3 percent to $37.4 billion..

To gauge the effect of February's dollar valued factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index....by stage of fabrication, the value of finished goods inventories increased 0.5% to $251,683 million; the value of work in process inventories also increased by 0.5% to $206,550 million, and the value of materials and supplies inventories increased by 1.3% to $244,208 million...at the same time, the producer price index for February indicated that prices for finished goods increased 1.4%, that prices for intermediate processed goods were 2.7% higher, and that prices for unprocessed goods were on average 4.3% higher, even as core raw materials were priced 1.3% lower than January's....assuming similar valuations for like inventories, that would suggest that February's real finished goods inventories were around 0.9% lower than January’s, that real inventories of intermediate processed goods were about 2.2% smaller, and that real raw material inventory inventories were on average lower, even as core raw material inventories were higher…since there was a small increase in 4th quarter real factory inventories, the large February decrease, following an equally large decrease in January's real factory inventories, will thus have a significant negative impact on 1st quarter GDP...

February Wholesale Sales Down 0.8%, Wholesale Inventories Up 0.6% Due to Higher Prices

The February report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $538.3 billion, down 0.8 percent (±0.7 percent) from the revised January level, but 6.4 percent (±0.9 percent) higher than wholesale sales of February 2020... the December 2020 to January 2021 percent change in sales was revised from the preliminary estimate of up 4.9 percent (±0.7 percent) to $531.7 billion to an increase of 4.4 percent (±0.9 percent) to $542,867 million in conjunction with an annual revision of previously published data based on the results of the 2019 Annual Wholesale Trade Survey and the results of the 2017 Economic Census, which makes any such comparisons to previous published amounts nonsense....as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this February report estimated that wholesale inventories were valued at $682.5 billion at month end, an increase of 0.6 percent (+/-0.4%) from the revised January level and also 2.0 percent (±1.1 percent) higher than February a year ago, with the January preliminary inventory estimate revised upward from the advance estimate of up 1.3 percent (±0.4 percent) to $661.7 billion to an increase of 1.4 percent (±0.2 percent) to $678.2 billion....

For national accounts, the wholesale inventories reported here will be adjusted the February producer price index, ie the index a month prior to the one we just reported on...with notable exceptions such as inventories of farm products, chemicals and petroleum, we've previously estimated that wholesale inventories appear to be roughly 70% finished goods....with the February producer price index for finished goods up by 1.4% while the producer price indexes for intermediate goods & raw goods were 2.7% higher and 4.3% higher respectively, we can thus figure that February’s real wholesale inventories would have decreased by at least 0.8%, and probably by much more...since the real wholesale inventories inched up a bit over the 4th quarter, any real decrease in the 1st quarter will not only reverse that bit, but also subtract from the growth of GDP by the size of the real inventory decrease...

 

(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…)