Sunday, February 28, 2021

4th quarter GDP revision; January’s income and outlays, durable goods, & new home sales

The key economic reports released during the past week were the 2nd estimate of 4th quarter GDP and the January 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 January and the January report on new home sales, both from the Census bureau....this week also had the release of the Chicago Fed National Activity Index (CFNAI) for January, a weighted composite index of 85 different economic metrics, which rose to +0.66 in January from +0.41 in December, which was revised from the +0.52 reported for December last month... after revisions, the 3 month average of the CFNAI slipped to +0.47 in January from a revised +0.60 in December, which still indicates that national economic activity has been somewhat above the historical trend over recent months...in addition, the week also saw the Case-Shiller Home Price Index for December from S&P Case-Shiller, which reported that home prices nationally during October, November and December averaged 12.4% higher than prices for the same homes that sold during the same 3 month period a year earlier...since last month's Case-Shiller report indicated that home prices for September, October and November averaged 9.5% higher than September, October and November of 2019, this month's price index jump means that the implied but unpublished one month year over year index would have risen ~8.7% between September and December...

This week also saw the release of the last three regional Fed manufacturing surveys for February: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +17.2 from last month's +10.2, suggesting a broader based expansion of the Texas area economy; 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 held steady at +14 in February, suggesting an ongoing modest expansion in that region's manufacturing, and the Kansas City Fed manufacturing survey for February, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to +24 in February, up from +17 in January and +14 in December, suggesting widespread improvement among that region's manufacturers...

4th Quarter GDP Grew at a 4.1% Rate, Revised from 4.0% in the Advance Estimate

The Second Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 4.1% rate in the quarter, revised from the 4.0% growth rate reported in the advance estimate last month, as slower growth of personal consumption than was previously estimated was more than offset by greater growth of in fixed investment and inventories....in current dollars, our fourth quarter GDP grew at a 6.14% annual rate, increasing from what would work out to be a $21,170.3 billion a year output rate in the 3rd quarter to a $21,487.9 billion annual rate in the 4th quarter, with the headline 4.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.1%, known in aggregate as the GDP deflator, was computed from the weighted price changes of each of the GDP components and applied to their current dollar change....

Remember that the second estimate GDP news release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change typically 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 4th quarter GDP, which can be accessed directly on the BEA's GDP landing page, which also offers links to just 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 1st quarter of 2017; 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 over the last 5 quarters; and table 4, which shows the change in the price indexes for each of the components...the pdf for the 4th quarter advance estimate, which this estimate revises, is here...

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from 2.5% to an overall 2.4% growth rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 3.97% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation grew at a 1.6% annual rate in the 4th quarter, and which was revised from the 1.5% PCE inflation rate reported a month ago, and thus accounted for most of the revision to PCE...real consumption of durable goods shrank at a 0.6% annual rate, which was revised from the statistically unchanged growth rate shown in the advance report, and subtracted 0.04 percentage points from GDP, as consumption of motor vehicles, consumption of furniture and appliances and consumption of recreational goods and vehicles all declined slightly...in addition, real consumption of nondurable goods by individuals shrank at a 1.1% annual rate, revised from the 0.7% contraction rate reported in the 1st  estimate, and subtracted 0.15 percentage points from the 4th quarter’s economic growth rate, as modest growth in real consumption of clothing, footwear, and other non-durable goods was more than offset by lower consumption of food, gasoline and other energy goods...at the same time, consumption of services grew at a 4.0% annual rate, statistically unrevised from the 4.0% growth rate reported last month, and added 1.80 percentage points to the final GDP tally, as a 12.2% growth rate in real health care services accounted for more than three-quarters of 4th quarter services growth...

Meanwhile, seasonally adjusted real gross private domestic investment grew at a 26.5% annual rate in the 4th quarter, revised from the original 25.3% growth estimate reported last month, as real private fixed investment grew at a 19.1% rate, revised from the 18.4% growth rate reported in the advance estimate, while inventory growth was greater than previously estimated...investment in non-residential structures was revised to show growth at a 1.1% rate, down from the 3.0% growth rate previously reported, whiile real investment in equipment grew at 25.7% rate, revised up from the 24.9% growth rate shown a month ago...meanwhile the quarter's investment in intellectual property products was revised from growth at a 7.5% rate to growth at a 8.4% rate, while at the same time real residential investment was shown to be growing at a 35.8% annual rate, revised from the 33.5% rate shown in the previous report....after those revisions, the increase in investment in non-residential structures added 0.03 percentage points to the 4th quarter's growth rate, the increase in investment in equipment added 1.33 percentage points to the quarter's growth rate, growth in investment in intellectual property added 0.40 percentage points to the growth rate of 4th quarter GDP, and growth in residential investment added 1.37 percentage points to the growth of 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.....

At the same time, growth in real private inventories was revised from the originally reported $44.6 billion in inflation adjusted growth to show that inventory grew at an inflation adjusted $48.0 billion rate….that came after inventories had contracted at an inflation adjusted $3.7 billion rate in the 3rd quarter, and hence the (rounded) $51.8 billion positive change in real inventory growth from the 3rd to the 4th quarter added 1.11 percentage points to the 4th quarter's growth rate, revised from the 1.04 percentage point addition to GDP from inventory growth reported in the advance estimate....however, since greater growth of inventories indicates that more of the goods produced during the quarter were left in a warehouse or sitting on the shelf, their increase at a $51.8 billion rate meant that real final sales of GDP were actually smaller by that amount, and hence real final sales of GDP grew at a 3.0% rate in the 4th quarter, statistically unrevised from the real final sales growth rate shown in the advance estimate, and down from the real final sales growth rate of 25.9% in the 3rd quarter, when the greater inventory growth from the deeply negative 2nd quarter inventory figure had reduced real final sales by as much as it added to the quarter's GDP....

The previously reported increase in real exports was revised a bit lower with this estimate, while the previously reported increase in real imports was revised a bit higher, so on net the change in our net trade was a greater subtraction from GDP rather than was previously reported...our real exports grew at a 21.8% rate rather than the 22.0% 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 2.00 percentage points to the 4th quarter's growth rate, revised from the 2.01 percentage point addition shown in the previous report....meanwhile, the previously reported 29.5% growth rate in our real imports was revised to a 29.6% growth rate, and since imports are subtracted from GDP because they represent either consumption or investment that was added to an other GDP component that was not produced here, their increase subtracted 3.55 percentage points from 4th quarter GDP, rather than the 3.53 percentage point subtraction shown last month....thus, our deteriorating trade balance subtracted a net of 1.55 percentage points from 4th quarter GDP, rather than the 1.52 percentage point subtraction that had been indicated by the advance estimate..

Finally, there was a small upward revision to real government consumption and investment in this 2nd estimate, since the real contraction rate for the entire government sector was revised from a 1.2% rate to a 1.1% rate...however, real federal government consumption and investment was seen to have shrunk at a 0.9% rate in this estimate, revised from the 0.5% contraction rate shown in the advance estimate, as real federal outlays for defense grew at a 4.7% rate and added 0.20 percentage points to 4th quarter GDP, revised from the 5.0% growth rate shown previously, while all other federal consumption and investment was revised from a 8.4% contraction rate to contraction at a 8.9% rate, which subtracted 0.26 percentage points from 4th quarter GDP....meanwhile, real state and local consumption and investment was revised from shrinking at a 1.7% rate in the first estimate to shrinking at a 1.2% rate in this estimate, as state and local investment spending grew at a 5.2% rate and added 0.11 percentage points to 4th quarter GDP, while state and local consumption spending shrunk at a 2.7% rate and subtracted 0.24 percentage points from GDP....note that government outlays for social insurance are not included in this government GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, thus indicating an increase in the output of those goods or services...

Personal Income up 10.0% in January, Personal Spending up 2.4%, PCE Price Index up 0.3%

The January 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 reporting seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much income and spending would change over a year if January'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 December to January..

Hence, when the opening line of the news release for this report tell us "Personal income increased $1,954.7 billion (10.0 percent) in January ", they mean that the annualized figure for seasonally adjusted personal income in January, $21,453.9 billion, was $1,954.7 billion higher, or a bit more than 10.0% higher than the annualized personal income figure of $19,499.2 billion extrapolated for December; the actual, unadjusted change in personal income from December to January is not given...at the same time, annualized disposable personal income, which is income after taxes, rose by nearly 11.4%, from an annual rate of $17,254.5 billion in December to an annual rate of $19,217.7 billion in January...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 January, there was a $1,954.7 billion annual rate of increase in personal income because there was $1,977.1 billion annual rate of increase in personal current transfer programs, including an increase of $1,682.1 billion annualized from "other" government programs and a $262.8 billion annualized increase in unemployment insurance, both of which came about as provisions of the Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act of late December, in addition to a $69.7 billion annual rate of increase in income from wages and salaries, while interest and dividend income saw a decrease at a $88.7 billion annual rate...

For the January personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased at an annual rate of $340.9 billion, or by 2.4%, from a $14,475.9 billion annual rate in December to a $14,816.8 billion annual rate in January; at the same time, the December PCE figure was revised down from the originally reported $14,493.7 billion annual rate, a revision that was already incorporated into this week's 4th quarter GDP estimate (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 $348.7 billion to a $15,287.6 billion annual rate in January, which left total personal savings, which is disposable personal income less total outlays, at a $3,930.1 billion annual rate in January, up from the revised $2,315.6 billion in annualized personal savings in December... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to a eight month high of 20.5% in January, up from the December savings rate of 13.4% ...

As you know, before January's personal consumption expenditures can be used in the 1st quarter GDP computation, 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 shown in Table 9 in the pdf for this report, which is a chained price index based on 2012  prices = 100....that PCE price index rose from 112.149 in December to 112.530 in January, giving us a month over month PCE inflation rate of 0.33973%, which BEA rounds to a 0.3% increase in reporting it in the text and tables here....then, applying that 0.33973% inflation adjustment to the increase in January PCE shows that real PCE rose by 2.0084% in January, which the BEA reports as a 2.0% increase...note that when those PCE price indexes are applied to a given month's annualized PCE in current dollars, it gives us that month's annualized real PCE in those same 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 pi PDF, where we see that January's chained dollar consumption total works out to 13,167.4 billion annually, 2.008% more than December's 12,908.2 billion, statistically the same as the real PCE increase we just computed..

However, to estimate the impact of the change in January PCE on the change in GDP, the change from December doesn't help us much, since GDP is reported on a quarterly basis...thus we have to compare January's real PCE to the the real PCE of the 3 months of the fourth 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 in this report, where we find that the annualized real PCE for the 4th quarter was represented by 13,000.3 billion in chained 2012 dollars..(ie, that's the same as what's shown in table 3 of the pdf for the 4th quarter GDP report)....when we compare January's real PCE representation of 13,167.4 billion to the 4th quarter real PCE figure of 13,000.3 billion, we find that real PCE is growing at a 5.24% annual rate so far in the 1st quarter....that’s a rate that means that even if January's real PCE does not improve during February and March, growth in PCE would still add 3.63 percentage points to the growth rate of 1st quarter GDP...

January Durable Goods: New Orders up 3.4%, Shipments Up 2.0%, Inventories Down 0.3%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for January (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $8.5 billion or 3.4% to $256.6 billion in January, which was also 4.5% greater than the value of new orders in January 2020... at the same time, December's new orders were revised from the $245.3 billion reported last month to $248.1 billion, now indicated to be 1.2% greater than November's new orders, revised from the 0.2% increase previously reported....

The volatile monthly new orders for transportation equipment drove the January new orders increase, as new transportation equipment orders rose $6.1 billion or 7.8 percent to $85.1 billion, on a 389.9% increase to $5,036 million in new orders for commercial aircraft and a 63.5% increase to $4,808 million in new orders for defense aircraft....excluding orders for transportation equipment, other new orders rose 1.4%, while excluding just new orders for defense equipment, new orders rose 2.3%....at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, rose $354 million or 0.5% to $72,924 million...

Meanwhile, the seasonally adjusted value of January shipments of durable goods, which will be included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, increased in value by $5.1 billion or 2.0 percent to $260.6 billion, after the value of December shipments was revised from from $253.8 billion to $255.6 billion, now up 2.1% from November...a jump in the value of shipments of machinery led the January increase, as it rose $1.1 billion or 3.6 percent to $33.2 billion...with that contribution, shipments of nondefense capital goods less aircraft rose 2.1% to $72,054 million, after shipments of December’s capital goods were revised from $70,208 million to $70,566 million, now 1.0% higher than November...

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell by $1.4 billion or 0.3 percent to $424.3 billion, after the value of December inventories was revised from $425.9 billion to $425.7 billion, still down 0.2% from November....lower inventories of transportation equipment drove the December decrease, as they fell $2.3 billion or 1.5 percent to $145.7 billion, while the value of inventories excluding those of transportation equipment rose $860 million or 0.3 percent to $278.6 billion...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but quite volatile monthly new orders, rose for the first time in eight months, but just by $1.0 billion or 0.1 percent to $1,072.6 billion...that followed a 0.2% December decrease of $2,247 million to $1,071,554 million, which was previously reported as a 0.3% decrease to $1,070.4 billion...a $0.9 billion or 1.2 percent increase to $78.6 billion in unfilled orders for fabricated metal products led January the increase, while unfilled orders for transportation equipment orders were down 0.1% to $705,873 million...the unfilled order book for durable goods is still 6.2% below the level of last January, with unfilled orders for transportation equipment 11.2% below their year ago level, led by a 16.3% decrease in the backlog of orders for commercial aircraft...

NB: for those who are interested in seeing graphs relating to this release, FRED at the St Louis Fed offers graphs of 445 different durable goods data sets...to change what is displayed on any graph, (ie, dollars, percent, etc) click the edit button and then click the edit line 1 tab and make your selection from the units menu...to change the displayed line graph into a bar graph, click the edit button and then the format tab...

January’s New Home Sales Reported Higher After Prior Months were Revised Higher

The Census report on New Residential Sales for January (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 923,000 homes annually in January, which was 4.3 percent (±18.1 percent)* above the revised December annual sales rate of 885,000, and 19.3 percent (±19.5 percent)* above the estimated 774,000 annual rate that new single family homes were selling at in January of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether January new home sales rose or fell from those of December, or even from the January sales of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales of new single family homes in December were revised from the annual rate of 842,000 reported a month ago to an annual rate of 885,000, while new home sales in November, initially reported at an annual rate of 841,000 and revised to a 829,000 rate with the last report, were revised back up to a 839,000 a year rate with this report, and while October's new home sales rate, initially reported at an annual rate of 999,000 and revised from a 945,000 to a 949,000 a year rate last month, were again revised to a 965,000 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 70,000 new single family homes sold in January, up from the estimated 59,000 new homes that sold in both December and in November....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in January was $346,400, down from the median sale price of $353,100 in December but up from the median sales price of $328,900 in January a year ago, while the average January new home sales price was $408,800, up from the $394,700 average sales price in December, and up from the average sales price of $384,000 in January a year ago....a seasonally adjusted estimate of 307,000 new single family houses remained for sale at the end of January, which represents a 4.0 month supply at the January sales rate, down from the revised 4.1 months of new home supply now indicated for both December and for November....for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk:  New Home Sales increase to 923,000 Annual Rate in January and A few Comments on January 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, February 21, 2021

January’s retail sales, industrial production, producer prices, new home construction, and existing home sales; December's business inventories..

Major reports that were released this past week included the Retail Sales Report for January and the Business Sales and Inventories Report for December from the Census Bureau, the January report on Industrial Production and Capacity Utilization from the Fed, the January Producer Price Index from the Bureau of Labor Statistics, the January report on New Residential Construction from the Census Bureau, and the Existing Home Sales Report for January from the National Association of Realtors (NAR)…The week also saw the release of the first two regional Fed manufacturing surveys for February: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from +4.7 in December and from +3.5 in January to +12.1 in February, its highest level in several months, suggesting a pickup in the pace of First District manufacturing growth.. meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions slipped from +26.5 in January to + 23.1 in February, still indicating fairly widespread growth among that region's manufacturing firms this month...

Retail Sales Rose 5.3% in January after December Sales were Revised Lower

Seasonally adjusted retail sales increased 5.3% in January after retail sales for December were revised lower...the Advance Retail Sales Report for January (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $568.2 billion during the month, which was up 5.3 percent (±0.5%) from December's revised sales of $539.7 billion and 7.4 percent (±0.7 percent) above the adjusted sales in January of last year....December's seasonally adjusted sales were revised 0.2% lower, from $540.9 billion to $539.7 billion, while November's sales were revised higher, from $544.6 billion to $545,248 million; as a result, the November to December change was revised from down 0.7 percent (±0.5%) to down 1.0 percent (±0.2 percent)*.....the revisions to November and December sales partly offset each other but indicate that the 4th quarter's personal consumption expenditures would be revised lower at a rate of around $2.2 billion annually, which would reduce 4th quarter GDP by around 0.03 percentage points....estimated unadjusted retail sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 17.3%, from $616,649 million in December to $509,802 million in January, while they were 5.8% higher than the $481,862 million of sales in January a year ago, so we can see how a large seasonal adjustment to holiday and post holiday sales altered the headline sales results, compared to the big sales decrease that would normally be expected in January...

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

January 2021 retail sales table

To compute January's real personal consumption of goods data for national accounts from this January retail sales report, the BEA will use the corresponding price changes from the January consumer price index, which we reviewed last week...to estimate what they will find, we'll first separate out the volatile sales of gasoline from the other totals...from the third line on the above table, we can see that January retail sales excluding the 4.0% price-related increase in sales at gas station were up by 5.4%.....then, subtracting the figures representing the 2.4% increase in grocery & beverage store sales and the 6.9% increase in food services sales from that total, we find that core retail sales were up by almost 6.5% for the month...since the CPI report showed that the composite price index for all goods less food and energy goods was unchanged in January, we can thus approximate that real retail sales excluding food and energy will on average be close to our nominal core retail sales, or show an increase of 6.5%....however, the actual adjustment in national accounts data 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 furniture stores were up 12.0%, the price index for household furnishings and supplies was 0.5% lower, which would suggest that real sales at furniture stores rose by roughly 12.5%…..on the other hand, while nominal sales at clothing stores were 5.0% higher in January, the apparel price index was 2.2% higher, which means that real sales of clothing were only around 2.7% higher...

In addition to figuring those core retail sales, we should also adjust food and energy retail sales for their price changes separately…the January CPI report showed that the food price index was 0.1% higher, with the index for food purchased for use at home 0.1% lower, while prices for food bought to eat away from home were 0.4% higher... thus, while nominal sales at food and beverage stores were 2.4% higher, real sales of food and beverages would be roughly 2.5% higher in light of the 0.1% lower prices…meanwhile, the 6.9% increase in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants rose about 6.5% during the month....in addition, while sales at gas stations were up 4.0%, there was a 7.4% increase in the retail price of gasoline during the month, which would suggest that real sales of gasoline were down on the order of 3.4%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales...averaging real sales that we have thus estimated together, we can then estimate that the income and outlays report for January will show that real personal consumption of goods rose by about 5.2% in January, after falling by a revised 1.4% in December, and by a revised 1.3% in November...at the same time, the 6.5% increase in real sales at bars and restaurants would boost January’s real personal consumption of services by almost 0.5%....note that in estimating December's revised real goods consumption, we have incorporated both the revision to December's real sales and last week's downward revision to December's consumer prices, which would precipitate a similar downward revision to the December PCE price index for goods and a corresponding upward increase in December's real goods consumption...

Industrial Production Rose 0.9% in January After Prior Five Months Revised Higher

The Fed's G17 release on Industrial production and Capacity Utilization indicated that seasonally adjusted industrial production rose by 0.9% in January after rising by a revised 1.3% in December and by a revised 0.9% in November, but it still remained 1.8% lower than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 107.2 in January from 106.2 in December, after the December index was revised from 105.7 to 106.2, the November index was revised from the 104.1 reported last month to 104.9, the October index was revised from 103.6 to 103.9, the September index was revised from 102.6 to 102.8, and the August index was revised from 102.7 to 102.9....as a result of this month's revisions, industrial production grew 1.0% in August, rather than 0.7% as previously reported, shrunk 0.1% in September, same as was previously reported, rose 1.1% in October, revised from up 1.0%, and grew 0.9% in November, revised from the 0.5% growth previously reported, and grew 1.3% in December rather than the 1.6% growth that was previously reported...

The manufacturing index, which accounts for around 77% of the total IP index, rose 1.0% in January, from 102.8 to 103.9, after the December manufacturing index was revised from 102.2 to 102.8, the the November index was revised from 101.3 to 101.9, October index was revised from 100.5 to 100.9, the September index was revised from 99.2 to 99.4, and the August manufacturing index was revised from 99.1 to 99.1....meanwhile, the mining index, which includes oil and gas well drilling, rose from 116.9 in December to 119.6 in January after the December index was revised down from 117.4, which left the mining index to 11.5% below where it was a year earlier...finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, fell 1.2% in January, from 106.4 to 105.1, after the December utility index was revised from 106.3 to 106.4 and the November utility index was revised from 100.0 to 101.5....since last year's heating requirements for December and January were below normal and drove the utility index lower at that time, this year's utility index is now 6.6% higher than it was a year ago...

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 75.6% in January from 74.9% in December, which was revised from the 74.5% that was reported last month ...capacity utilization of NAICS durable goods production facilities rose from an upwardly revised 73.9% in December to 74.6% in January, while capacity utilization for non-durables producers rose from an upwardly revised 75.6% to 76.8%...capacity utilization for the mining sector rose to 82.2% in January from 80.2% in December, which was originally reported as 80.5%, while utilities were operating at 73.5% of capacity during January, down from their 74.6% of capacity during December, which was previously reported at 74.5%...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....

Producer Prices rose 1.3% in January After Rising 0.8% over All of 2020

The seasonally adjusted Producer Price Index (PPI) for final demand rose 1.3% in January, as prices for finished wholesale goods were on average 1.4% higher, while margins of final services providers increased by 1.3%...that followed a revised December report that now shows the PPI was up 0.3%, with prices for finished wholesale goods up 1.0% while margins of final services providers were 0.1% lower, a revised November report that shows the PPI was 0.1% higher, with prices for finished wholesale goods rising 0.3% while margins of final services providers decreased 0.2%, a revised October report that indicates the PPI was 0.5% higher, with prices for finished wholesale goods rising 0.6% and margins of final services providers rising 0.5%, and a revised September report that indicates the PPI was 0.3% higher, with prices for finished wholesale goods 0.4% higher and margins of final services providers 0.2% higher....revisions to prior reports with this release reflect the routine annual recalculation of seasonal adjustment factors and affect previously published seasonally adjusted indexes and percent changes for January 2016 through December 2020; it appears that at least part of the reason for the large jump in January producer prices was due a recalibration of weight allocations used to calculate the overall indexes to more accurately reflect recent sales patterns, which would have thus increased the weighting of commodities and services in greatest demand.....on an unadjusted basis, producer prices are now 1.7% higher than a year ago, up from the 0.8% 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 1.2% for the month, and is now 2.0% higher than in January a year ago, up from the 1.1% year over year increase as was shown in December...

As noted, the price index for final demand for goods, aka 'finished goods', was 1.4% higher in January, after being a revised 1.0% higher in December, 0.3% higher in November, 0.6% higher in October, 0.4% higher in September, 0.4% higher in August, 0.5% higher in July, 0.4% higher in June, 1.4% higher in May, 2.8% lower in April, 1.7% lower in March, 0.7% lower in February, and 0.3% higher in January of last year, with all of those monthly figures revised...the finished goods price index rose 1.4% in January because the price index for wholesale energy goods was 5.1% higher, after it had risen by 4.9% in December, 1.3% in November, and by 0.8% in October, while the price index for wholesale foods rose 0.2%, after falling 0.2% in December, rising by 0.6% in November, by 1.9% in October, and by a revised 1.7% in September, while the index for final demand for core wholesale goods (excluding food and energy) was 0.8% higher, after rising by 0.5% in November....wholesale energy prices averaged 5.1% higher due to a 13.6% increase in wholesale prices for gasoline, a 7.6% increase in wholesale prices for No.2 diesel fuel, and a 21.8% increase in wholesale prices for liquefied petroleum gas...meanwhile, the wholesale food price index rose 0.2% on a 19.0% increase in the wholesale price index for oilseeds, an 18.2% increase in the wholesale price index for grains, and a 11.3% increase in wholesale price index for fresh fruits and melons....among core wholesale goods, the wholesale price index for industrial chemicals rose 7.0%, the wholesale price index for light motor trucks rose 1.5%, and the wholesale price index for iron and steel scrap rose 20.6% while the wholesale price index for communication equipment fell 1.7% ..

At the same time, the index for final demand for services rose 1.3% in January, after falling by 0.1% in December, falling by 0.2% in November, rising by 0.5% in October, and rising by 0.2% in September, as the index for final demand for trade services rose 1.0%, the index for final demand for transportation and warehousing services rose 1.3%, and the core index for final demand for services less trade, transportation, and warehousing services was 1.4% higher.....among trade services, seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers rose 5.3%, margins for TV, video, and photographic equipment and supplies retailers rose 11.1%, and margins for machinery and vehicle wholesalers rose 4.2%, while margins for automobile retailers fell 7.7%.. among transportation and warehousing services, average margins for rail transportation of passengers rose 1.7% while average margins for truck transportation of freight rose 2.2%...among the components of the core final demand for services index, the index for portfolio management rose 9.4%, the index for management, scientific, and technical consulting services rose 16.1%, and margins for traveler accommodation services rose 13.3%, while margins for property and casualty insurance fell 1.7%…

This report also showed the price index for intermediate processed goods rose 1.7% in January, after rising a revised 1.4% in December, 1.3% in November, 0.3% in October, 0.6% in September, 0.9% in August, 1.4% in July, and 1.4% in June, but after being unchanged in May and falling the prior 5 months....the price index for intermediate energy goods rose 2.0%, as refinery prices for gasoline rose 13.6%, refinery prices for residual fuels rose 18.6%, and producer prices for liquefied petroleum gas rose 21.8%, while producer prices for natural gas to electric utilities fell 21.1%... meanwhile, the price index for intermediate processed foods and feeds rose 0.1%, as the producer price index for fats and oil rose 3.3% and the producer price index for prepared animal feeds rose 1.2%...at the same time, the core price index for intermediate processed goods less food and energy rose 1.8% as the producer price index for industrial chemicals rose 7.0%, the producer price index for steel mill products rose 5.2%, the producer price index for paving mixtures and blocks rose 4.1%, and the producer price index for softwood lumber rose 13.9%...prices for intermediate processed goods are now 3.1% higher than in January a year ago, the second 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 3.8% in January, after rising a revised 2.2% in December, 7.4% in November, 0.3% in October, 4.2% in September, a revised 4.0% in August 0.6% in July, 5.4% in June and 8.4% in May, but after falling a revised 13.7% in April and 8.1% in March....that was as the January price index for crude energy goods rose 5.3% as crude oil prices rose 12.0% while unprocessed natural gas prices fell 0.9%, while the price index for unprocessed foodstuffs and feedstuffs fell 1.2% on an 20.4% drop in the price of raw milk, a 13.0% decrease in the price of slaughter chickens, and a 4.9% decrease in the price of slaughter hogs...at the same time, the index for core raw materials other than food and energy materials rose 8.9%, as producer prices for recyclable paper rose 7.9%, the price index for iron and steel scrap rose 20.6%, the price for aluminum base scrap rose 9.3%, and raw cotton prices rose 7.9%... this raw materials index is now 6.6% higher than a year ago, the third annual increase in 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 1.3% in January, after rising 0.4% in December, falling 0.1% in November, rising 0.6% in October, rising 1.1% in September, 0.8% in August, 0.5% in July, and 0.3% in June….the price index for intermediate trade services was 1.1% higher, as margins for metals, minerals, and ores wholesalers rose 11.4% and margins for intermediate paper and plastics products wholesalers rose 1.4%...meanwhile, the index for transportation and warehousing services for intermediate demand was 0.4% higher, as the intermediate price index for truck transportation of freight rose 2.2% and the intermediate price index for air mail and package delivery services, not including by USPS, rose 1.3%...at the same time, the core price index for intermediate services less trade, transportation, and warehousing rose 1.5%, as the intermediate price index for administrative and general management consulting services jumped 22.9%, the intermediate price index for traveler accommodation services rose 13.3% and the intermediate price index for portfolio management rose 9.4%...over the 12 months ended in January, the year over year price index for services for intermediate demand is 2.8% higher than it was a year ago, the fifth consecutive positive annual change since it turned negative year over year in April for the first time in the history of this index...

December Business Sales Up 0.8%, Business Inventories Up 0.6%

After the release of the January retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for December (pdf), which incorporates the revised December retail data from that January report and the earlier published December wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,494.2 billion in December, up 0.8 percent (±0.2 percent) from November's revised sales, and up 2.5 percent (±0.4 percent) from December’s sales of a year earlier...note that total November sales were concurrently revised up from the originally reported $1,480.8 billion to $1,482.771 million, now statistically unchanged from October, rather than down 0.1%...manufacturer's sales rose 1.7% to $501,815 million in December; retail trade sales, which exclude restaurant & bar sales from the revised December retail sales reported earlier, fell 0.6% to $488,579 million, while wholesale sales rose 1.2% to $503,778 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,971.7 billion at the end of December, up 0.6 percent (±0.1 percent) from November, but 2.6 percent (±0.4 percent) lower than in December a year earlier...at the same time, the value of end of November inventories was revised from the $1,959.9 billion reported last month to $1,960.5 billion, still up 0.5% from October....seasonally adjusted inventories of manufacturers were estimated to be valued at $679,707 million at the end of December, 0.3% more than at the end of November, inventories of retailers were valued at $617,066 million, up 1.2% from November,  and inventories of wholesalers were estimated to be valued at $658,047 million at the end of December, 0.3% higher than in November...

Last week we estimated that 4th quarter GDP was underestimated by around 0.09 percentage points based on what the wholesale inventory report showed, and a week earlier we estimated 4th quarter GDP was underestimated by around by about 0.08 or 0.09 more percentage points based on what the factory inventories report showed....in the advance report on 4th quarter GDP of two 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 $624,149 billion at the end of December, up 0.8% from a revised $617,734 billion in November....that's $0.294 billion less than the $624,443 billion for the end of the quarter that this report shows, which would mean that the quarterly change in 4th quarter retail inventories were underestimated at roughly a $1.2 billion annual rate, or by an amount that would add about 0.02 or 0.03 percentage points to GDP...combined with our previous figures on factory and wholesale inventories, then, this report would suggest that the growth rate of 4th quarter GDP should be revised upwards by around 0.20 percentage points when the 2nd estimate is released next week....

January Housing Starts Reported Lower; Building Permits at 14 Year High

The January report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in January was at a seasonally adjusted annual rate of 1,580,000, which was  6.0 percent (±16.4 percent)* below the revised December estimated annual rate of 1,680,000, and was 2.3 percent (±13.9 percent)* below last January's rate of 1,617,000 housing starts annually....the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month, or even over the past year, with the figures in parenthesis the most likely range of the change indicated; in other words, January housing starts could have been up by 10.4% or down by as much as 22.4% from those of December, with revisions of a greater magnitude in either direction possible...in this report, the annual rate for December housing starts was revised from the 1,669,000 reported a month ago to a 14 year high of 1,680,000, while November starts, which were first reported at a 1,547,000 annual rate, were revised from last week's initial revised figure of 1,578,000 back to a 1,553,000 annual rate....

The 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 109,500 housing units were started in January, down from the revised 115,400 units that were started in December, and down from the 117,800 units that were started in November...of those housing units started in January, an estimated 77,900 were single family homes and 30,300 were units in structures with more than 5 units, down from the revised 89,400 single family starts in December but up from the 25,200 units started in structures with more than 5 units in December...

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 January, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,881,000, which was a 14 year high for permits, 10.4 percent (±1.2 percent) above the revised December rate of 1,704,000 permits, and 22.5 percent (±1.8 percent) above the 1,536,000 a year rate of building permit issuance in January a year earlier...the annual rate for housing permits issued in December was revised from the 1,709,000 reported last month to 1,704,000....

Again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 128,300 housing units were issued in January, down from the revised estimate of 133,600 new permits issued in December....of those, 83,900 were permits for single family homes and 40,900 were permits for units in structures of more than 5 units, down from the 88,500 single family permits in December, and down from the 41,500 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 decreased to 1.580 Million Annual Rate in January and Comments on January Housing Starts...

Existing Home Sales Rose 0.6% in January

The National Association of Realtors (NAR) reported that existing home sales rose by 0.6%% from December to January on a seasonally adjusted basis, projecting that 6.69 million existing homes would sell over an entire year if the January home sales pace were extrapolated over that year, a pace that was also 23.7% above the annual sales rate projected in January of a year ago...December home sales are now shown to have been running at a 6.65 million annual rate, revised down from the 6.76 million annual rate indicated by last month's report...the NAR also reported that the median sales price for all existing-home types was $303,900 in January, 14.1% higher than in January a year earlier, which they report "marks 107 straight months of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Tick Up 0.6% in January", 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 read about those things 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 seasonally adjusted and at a not very informative annual rate, we usually take look at the raw data overview (pdf) to see what actually happened during the month...this unadjusted data indicates that roughly 367,000 homes sold in January, down by 31.8% from the 538,000 homes that sold in December, but up 15.8% from the 317,000 homes that sold in January of last year, so we can see how that large mid-winter seasonal adjustment turned the headline sales figure positive...that same pdf indicates that the median home selling price for all housing types fell 1.7%, from a revised $309,200 in December to $303,900 in January, while the average home sales price was $337,700 in January, down 1.3% from the $342,000 average sales price in December, but up 11.5% from the $302,900 average home sales price of January a year ago...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 6.69 million in January and Comments on January 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, February 14, 2021

January’s consumer prices, December's wholesale trade and December's JOLTS

Major reports released this week included the January Consumer Price Index and the January Import-Export Price Index from the Bureau of Labor Statistics, the December report on Wholesale Trade, Sales and Inventories from the Census Bureau, and the Job Openings and Labor Turnover Survey (JOLTS) report for December, also from the BLS...

CPI Rose 0.3% in January on Higher Prices for Fuel, Clothing, and Medical Services

The consumer price index rose 0.3% in January, as higher prices for fuel, clothing, medical services and restaurant meals were only partly offset by lower prices for groceries, new & used vehicles, utilities and airline fares...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.3% higher in January, after rising by a revised 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, after falling by 0.1% in May, falling by 0.7% in April and by 0.3% in March, but after rising by 0.1% in February, and by 0.2% last January (all revised)....the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 260.474 in December to 261.582 in January, which left it statistically 1.3998% higher than the 257.971 reading of January of last year, which is reported as a 1.4% year over year increase, the same year over year increase reported a month ago....with higher prices for gasoline a major factor in the overall index increase, seasonally adjusted core prices, which exclude food and energy, were unchanged for the month, as the unadjusted core price index rose from 269.226 to 269.755, which left the core index 1.4101% ahead of its year ago reading of 266.004, which is reported as a 1.4% year over year increase, down from the 1.6% the year over year core price increase that was reported for December...note that this release includes revisions to 2020’s monthly seasonal adjustment factors for each index, which does not affect any of the year over year changes in price indicated...

The volatile seasonally adjusted energy price index rose 3.5% in January, after rising by a revised 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, 5.8% in March, 2.5% in February and by 0.3% last January, and hence is still 3.6% lower than in January a year ago...the price index for energy commodities was 7.3% higher in January, while the index for energy services was 0.3% lower, after rising 0.1% in December....the energy commodity index was up 7.3% on a 7.4% increase in the price of gasoline and a 5.4% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 1.2% higher...within energy services, the price index for utility gas service fell 0.4% after falling 0.8% in December but is still 4.3% higher than it was a year ago, while the electricity price index fell 0.2% after rising 0.4% in December....energy commodities are still averaging 8.7% lower than their year ago levels, with gasoline prices also averaging 8.6% lower than they were a year ago, while the energy services price index is still up 2.1% from last January, as electricity prices are still 1.5% higher than a year ago…

The seasonally adjusted food price index rose 0.1% in January, after rising by a revised 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% in July, rising 0.5% in June, 0.7% in May, 1.4% in April, 0.3% in March, 0.3% February, and by 0.2% last January, as the price index for food purchased for use at home was 0.1% lower in January, after rising 0.1% in December, while the index for food bought to eat away from home was 0.4% higher, as average prices at fast food outlets rose 0.6% and prices at full service restaurants rose 0.3%, while food prices at employee sites and schools averaged 4.7% lower...

In the food at home categories, the price index for cereals and bakery products was 0.8% lower as average bread prices fell 0.8%, the price index for breakfast cereal fell 0.7%, the price index for cookies fell 0.9% and the price index for frozen and refrigerated bakery products, pies, tarts, turnovers fell 3.5%...on the other hand, the price index for the meats, poultry, fish, and eggs food group was 0.5% higher as the price index for beef and veal rose 1.1%, the price index for poultry rose 0.5%, and egg prices rose 1.1%...at the same time, the seasonally adjusted index for dairy products was 0.4% lower, as whole milk prices fell 1.2% and the index for cheese and related products was 0.4% lower....meanwhile, the fruits and vegetables index was 0.2% lower as the price index for fresh vegetables fell 1.5% and the price index for canned fruits fell 1.7%....on the other hand, the beverages price index was 0.1% higher as the price index for carbonated drinks rose 0.8% and the price index for coffee also rose 0.8%....lastly, the price index for the ‘other foods at home’ category was 0.3% lower, as the price index for sugar and sugar substitutes fell 2.5%, the price index for margarine fell 2.9%, the price index for snacks fell 1.8%, and the price index for soups fell 3.0%...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 January, there are no food line items showing a price change greater than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which was unchanged in January after being unchanged in 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, but after rising by 0.2% in February, and 0.2% last January, the composite price index of all goods less food and energy goods was 0.1% higher in December, while the more heavily weighted composite for all services less energy services was unchanged....

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust January'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 major appliances fell 1.3%, the price index for furniture and bedding fell 0.5%, and the price index for outdoor equipment and supplies fell 2.5%....on the other hand, the apparel price index was 2.2% higher on a 5.3% increase in the price index for men's pants and shorts, a 5.5% increase in the price index for women's suits and separates, a 2.1% increase in the index for women's outerwear, a 6.2% increase in the price index for girls' apparel, and a 3.4% increase in the price index for boys' apparel....however, the price index for transportation commodities other than fuel was 0.6% lower as prices for new cars fell 0.5%, prices for new trucks fell 0.6% and prices for used cars and trucks fell 0.9%...meanwhile, the price index for medical care commodities 0.1% lower, as prescription drug prices fell 0.5% and nonprescription drug prices fell 1.1% while the price index for medical equipment and supplies rose 3.5%...on the other hand, the recreational commodities index was 0.1% higher on a 0.7% increase in TV prices, a 2.2% increase in the price index for other video equipment, a 3.3% increase in the price index for audio equipment, a 2.1% increase in the price index for newspapers and magazines, and a 1.3% increase in the price index for sports equipment...at the same time, the education and communication commodities index was 0.6% lower on a 3.1% decrease in the price index for telephone hardware, calculators, and other consumer information items and a 1.2% decrease in the price index for computer software and accessories….lastly, a separate price index for alcoholic beverages was 0.1% lower, while the price index for ‘other goods’ was up 1.1% on a 1.3% increase in the price index for stationery, stationery supplies, gift wrap, etal and a 1.8% increase in cigarette prices...

Within core services, the price index for shelter was 0.1% higher as rents and homeowner's equivalent rent were both 0.1% higher, while prices for lodging away from home at hotels and motels fell 2.2%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.4% and other household operation costs were on average 0.7% higher on a 1.3% increase in domestic services and a 2.0% increase in moving, storage, freight expense....meanwhile, the price index for medical care services was 0.5% higher, as the price index for physicians' services rose 1.6% and the price index for services by other medical professionals also rose 1.6%....on the other hand, the transportation services price index was 0.3% lower even though vehicle insurance costs rose 1.6% as airline fares fell 3.2%, car and truck rentals fell 1.1%, and the price index for intracity mass transit fell 0.6%...at the same time, the recreation services price index fell 1.0% as the index for cable and satellite television service fell 0.4% and the index for admissions to movies, concerts and sporting events fell 5.5%....meanwhile, the index for education and communication services was unchanged as the price index delivery services rose 0.6% and the price index for internet services and electronic information providers fell 0.4%...lastly, the index for other personal services was down 0.3% as the price index for checking accounts and other bank services fell 11.2% while the price index for laundry and dry cleaning services was 0.7% higher...

Among core line items, the price index for telephone hardware, calculators, and other consumer information items, which is now down by 17.8% since last January, the price index for men's suits, sport coats, and outerwear, which is still down 15.6% from a year ago, the price index for women's dresses, which has fallen by 11.6% in the past year, the price index for checking account and other bank services, which is down by 13.1% from a year ago, the price index for lodging away from home including hotels and motels, which has fallen by 13.3% in the past year, the price index for admission to sporting events, which is down by 21.4% from a year ago, and airline fares, which are now down by 21.3% since last January, have all seen prices drop by more than 10% over the past year, while the price index for used cars and trucks, which has risen 10.0% from a year ago, and the price index for major appliances, which is up 15.8% from last January, are the only line items to have increased by a double digit magnitude over that span.... 

Job Openings and Job Quitting Up In December; Hiring and Layoffs Down

The Job Openings and Labor Turnover Survey (JOLTS) report for December from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 74,000, from 6,572,000 in November to 6,646,000 in December, after November's job openings were revised 45,000 higher, from 6,527,000 to 6,572,000....December's jobs openings were also 1.4% higher than the 6,552,000 job openings reported in December a year ago, and the most since July, as the job opening ratio expressed as a percentage of the employed at 4.5% was up from the 4.4% ratio logged in November, and up from 4.1% in December a year ago...the professional and business services sector, with a 296,000 job opening increase to 1,523,000 openings, saw the largest percentage increase, while the arts, entertainment, and recreation sector saw job openings decrease by 50,000 to 66,000 (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 to 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 December, seasonally adjusted new hires totaled 5,539,000, down by 396,000 from the revised 5,935,000 who were hired or rehired in November, as the hiring rate as a percentage of all employed fell from 4.2% in November to 3.9% in December, which was the same as in December a year earlier (details of hiring by sector since August are in table 2)....meanwhile, total separations fell by 63,000, from 5,523,000 in November to 5,460,000 in December, as the separations rate as a percentage of the employed rose fell to 3.8% in November from 3.9% in December, the same rate as in December a year ago (see table 3)...subtracting the 5,460,000 total separations from the total hires of 5,539,000 would imply an increase of 79,000 jobs in December, far off from the revised payroll job decrease of 277,000 for December reported in the January establishment survey of 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 3,286,000 of us voluntarily quit our jobs in December, up by 106,000 from the revised 3,180,000 who quit their jobs in November, while the quits rate, widely watched as an indicator of worker confidence, rose by 0.1% to 2.3% of total employment, the same at it was a year earlier (see details in table 4)....in addition to those who quit, another 1,812,000 were either laid off, fired or otherwise discharged in December, down by 243,000 from the revised 2,055,000 who were discharged in November, as the discharges rate fell from 1.4% to 1.3% of all those who were employed during the month, which was still up from the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 362,000 in December, up from 288,000 in November, for an 'other separations rate’ of 0.3%, up from 0.2% in November and up from 0.2% in December 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...  

December Wholesale Sales Up 1.2%; Wholesale Inventories Up 0.3%

The December report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $503.8 billion, up 1.2 percent (±0.4 percent) from the revised November level, and up 1.7 percent (±1.2 percent)* from wholesale sales of December 2019... the November preliminary estimate was revised up to $497.6 billion from the $496.7 billion in sales reported last month, which is now 0.3% more than October sales...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this December report estimated that wholesale inventories were valued at a seasonally adjusted $651.5 billion at month end, up 0.3 percent (±0.4 percent)* from the revised November level but 1.6 percent (±0.9 percent) lower than in December a year ago, with the November preliminary estimate revised lower, from $649.8 billion to $649.5 billion at the same time, now statistically unchanged from October....

In the advance report on 4th quarter GDP of two weeks ago, 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 $650.4 billion at the end of December, up from $649.6 billion in November....that's $1.1 billion less than the $651.5 billion that this report shows, which would imply that the quarterly change in 4th quarter wholesale inventories was underestimated at roughly a $4.4 billion annual rate...assuming there's no distortion caused by reweighting the inflation adjustments to those inventories, that would mean that the growth rate of 4th quarter GDP was underestimated by around 0.09 percentage points based on what this report shows...

 

(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, February 7, 2021

January’s jobs report; December’s trade deficit, construction spending, and factory inventories

The major economic releases from the past week included the Employment Situation Summary for January from the Bureau of Labor Statistics, and three December reports that included metrics which were either estimated or included in last week's release of 4th quarter GDP: the Commerce Dept’s report on our International Trade for December, the December report on Construction Spending, and the Full Report on Manufacturers' Shipments, Inventories and Orders for December, with both of those from the Census Bureau...in addition, the Fed released the Consumer Credit Report for January, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $9.7 billion, or at a 2.8% annual rate, as non-revolving credit expanded at a 3.9% annual rate to $3,208.3 billion and revolving credit outstanding contracted at a 11.2% rate to $975.9 billion, now the lowest since April 2017..

The week’s privately issued reports included the ADP Employment Report for January, the light vehicle sales report for January from Wards Automotive, which estimated that vehicles sold at a 16.63 million annual rate in January, up from the 16.27 million annual sales rate reported in December, but down from the 16.84 million annual rate of January a year ago, and both of the widely followed purchasing manager's survey from the Institute for Supply Management (ISM): the January Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 58.7% in January, down from 60.5% in December, which still suggests an ongoing moderate expansion among manufacturing firms nationally, while the January Services Report On Business reported their NMI (non-manufacturing index) rose to 58.7% in January from 57.7% in December, indicating a slightly larger plurality of service industry purchasing managers reported expansion in various facets of their business in January...

This week also saw the release of the Mortgage Monitor for December from Black Knight Financial Services, which indicated that 6.08% of all mortgages were delinquent in December, down from 6.33% in November but up from 3.40% in December of 2019, and that a record low 0.33% of all mortgages were in the foreclosure process, the same percentage that were in foreclosure in November but down from the 0.46% that were in foreclosure a year ago...

Employers Add 49,000 Jobs in January, Unemployment Rate Falls to 3.6%

The Employment Situation Summary for January from the Bureau of Labor Statistics indicated little job creation during the month, while the month over month household survey results were skewed by the effects of an annual revision, which posted revised figures for January but not for December, the month that was revised.…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 49,000 jobs in January, after the previously estimated payroll job decrease for December was revised from 140,000 to 227,000, while the payroll jobs increase for November was revised down from 336,000 to 264,000…that means that this report represents a total of 110,000 fewer seasonally adjusted payroll jobs than the report of a month ago...the unadjusted data, meanwhile, shows that there were actually 2,773,000 fewer payroll jobs remaining in January than in December, as the normal post holiday seasonal layoffs in areas such as retail, wholesale, goods transportation, leisure and hospitality were normalized by the seasonal adjustments..

As is usual for a January jobs report, this report included the results of the annual benchmark revision, which revised prior reports and set March 2020 (the benchmark month) at 150,840,000 payroll jobs, 250,000 fewer jobs than was previously reported for that month, while job totals for every month in 2020 were concurrently revised by quantities ranging from 117,000 more jobs to 142,000 fewer (as is shown in Table A of the press release)...incorporating this revision, there were 9,603,000 fewer jobs in January than in January of a year ago....since all the newly revised figures are now incorporated into this month's report as if previously reported totals had never been reported, that's the way we'll cover it...

Seasonally adjusted job increases in January were concentrated in the professional and business services and in the public and private education sectors, and were offset by job losses in leisure and hospitality, in retail trade, in health care, and in transportation and warehousing...the broad professional and business services sector added 97,000 jobs, led by a 80,900 job increase in temporary help services and a 16,100 job increase in management and technical consulting services...government jobs increase by 43,000 on the strength of the addition of 49,400 jobs in local school districts and 36,100 in state government education...in addition, the private educational services sector saw an increase of 33,900 jobs...other sectors seeing job gains included information with 16,000, wholesale trade with 14,300, resource extraction with 9,000, and financial activities with 8,000....on the other hand, employment in the leisure and hospitality sector decreased by 61,000 jobs over the month, with the loss of 26,900 jobs in amusements, gambling, and recreation, 19,400 jobs in bars and restaurants and 18,300 jobs in accommodation....another 40,800 jobs were lost in health care and social assistance, as 19,700 employees were cut by nursing care facilities and 13,100 fewer were employed by home health care services...at the same time, retail sales saw a seasonally adjusted decrease of 37,800 jobs, with the loss of 30,500 employees of general merchandise stores, including warehouse clubs and supercenters, and 29,300 jobs from electronics and appliance stores...the transportation and warehousing sector lost 27,800 jobs, with 17,400 fewer employed in warehousing and storage and the loss of 13,700 "couriers and messengers" (ie delivery)...there were also 24,000 fewer employed by the federal government, 10,000 fewer manufacturing jobs, and a seasonally adjusted decrease of 3,000 construction jobs...

The establishment survey also showed that average hourly pay for all employees rose by 6 cents an hour to $29.96 an hour in January, after it had increased by a revised 29 cents an hour in December; at the same time, the average hourly earnings of production and non-supervisory employees increased by 3 cents to $25.18 an hour...employers also reported that the average workweek for all private payroll employees increased by 0.3 hour to 35.0 hours in January, while hours for production and non-supervisory personnel increased by 0.2 hour to 34.4 hours...at the same time, the manufacturing workweek rose 0.3 hour to 40.4 hours, while average factory overtime was unchanged at 3.2 hours...

Meanwhile, the January household survey's data reflects the benchmark revision to the 2020 population figures which showed that December's civilian noninstitutional population had been overstated by a rounded 476,000; from that, BLS determined that December's employment figure was 180,000​ too high​, ​the December unemployment ​figure was 20,000​ too high, and that​ ​the number of persons not in the labor force ​in December ​was 277,000​ too ​high...however, they left the December data in the household survey summary as it was previously published while incorporating the revisions to December in the January published data...with that, the survey appears to indicate that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 201,000 to 150,031,000, and that the estimated number of those unemployed fell by 606,000 to 10,130,000; which led to a 406,000 decrease in the total labor force and left those not in the labor force up by 27,000 at 100,690,000 after an apparent population decrease of 379,000...removing the effect of the revision on those changes, then, we find that the number employed in January was actually up by 381,000, that the number unemployed was down by 586,000, and hence the labor force fell by a rounded 206,000 and those not in the labor force rose by 304,000, as the population rose by 97,000...given those figures, the labor force participation rate fell from 61.5% to 61.4%, while the employment to population ratio, which we could think of as an employment rate, rose from 57.4% in December to 57.5% in January.....at the same time, the decrease in the number  counted as unemployed was large enough to dramatically lower the unemployment rate, as it fell from 6.7 to 6.3%....at the same time, the number of those who reported they were forced to accept just part time work fell by 216,000, from 6,170,000 in December to 5,954,000 in January, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 11.7% of the labor force in December to 11.1% in January, 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 of the press release to avoid the need to scroll up and down the page to view the tables you want to see..     

Trade Deficit Down 3.5% in December After Deficits for Prior Months are Revised Higher

Our trade deficit fell 3.5% in December as the value of both our exports and our imports increased, but our exports increased by much more....the Census report on our international trade in goods and services for December indicated that our seasonally adjusted goods and services trade deficit decreased by $2.4 billion to $66.6 billion in December from a revised November deficit of $69.0 billion....the value of our December exports rose by a rounded $6.2 billion or 3.4% to $190.0 billion on a $6.0 billion increase to $133.5 billion in our exports of goods and an increase of $0.3 billion to $56.5 billion in our exports of services, while the value of our imports rose by a rounded $3.8 billion or 1.5% to $256.6 billion on a $3.1 billion increase to $217.7 billion in our imports of goods, and a $0.7 billion increase to  $38.9 billion in our imports of services...the November trade deficit was revised from the originally reported $68.1 billion to $69.0 billion, while the seasonally adjusted goods data for every prior month of 2020 were revised as well, which thus means that previously published quarter over quarter figures for GDP should be revised as well...the revised figures now show that this year's trade deficit increased $101.9 billion, or 17.7 percent, from 2019, on a $396.4 billion or 15.7% decrease in exports and a $294.5 billion or 9.5% decrease in imports....export prices were on average 1.1% higher in December, which means the relative real increase in exports for the month was less than the nominal increase by that percentage, while import prices averaged 0.9% higher, meaning the increase in real imports was smaller than the nominal dollar decrease reported here by that percentage...

The $6.0 billion increase in our December exports of goods largely resulted from greater exports of industrial supplies and materials, foods, feeds and beverages, capital goods, and of automotive vehicles, parts, and engines...referencing the Full Release and Tables for December (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $1,804 million to $43,494 million on a $1,278 increase in our exports of crude oil, a $369 increase in our exports of fuel oil, a $385 million increase in our exports of petroleum products other than fuel oil, and a $289 million increase in our exports of natural gas liquids, and that our exports of foods, feeds and beverages rose by $1,362 million to $14,478 million on a $978 million increase in our exports of soybeans...in addition, our exports of capital goods rose by $1099 million to $39,980 million on a $422 million increase in our exports of semiconductors and a $390 million increase in our exports of industrial machines other than those itemized separately, and our exports of automotive vehicles, parts, and engines rose by $852 million to $13,267 million on a $213 million increase in our exports of trucks, buses, and special purpose vehicles and a $362 million increase in our exports of automotive parts other than engines, chassis, and tires...at the same time, our exports of consumer goods rose by $349 million to $16,670 million on a $313 million increase in our exports of jewelry, and our exports of those goods not categorized by end use rose by $420 million to $5,365 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows greater imports of industrial supplies and materials and of automotive vehicles, parts, and engines more than accounted for our $3.1 billion increase in imports, as their increases were partly offset by lower imports of consumer goods... our imports of industrial supplies and materials rose by $2,709 million to $42,372 million on a $1,202 increase in our imports of finished metal shapes, a $380 million increase in our imports of petroleum products other than fuel oil, a $367 million increase in our imports of crude oil, and a $298 million increase in our imports of iron and steel mill products, and our imports of automotive vehicles, parts and engines rose by $1,955 million to $33,136 million on a a $1549 million increase in our imports of new and used passenger automobiles and a $447 million increase in our imports of trucks, buses, and special purpose vehicles...in addition, our imports of capital goods rose by $630 million to $58,900 million on an $842 million increase in our imports of computers and a $372 million increase in our imports of computer accessories, and our imports of goods not categorized by end use rose by $4 million to $9,473 million...partly offsetting the increases in those import categories, our imports of consumer goods fell by $1,901 million to $59,608 million on a $1,516 million decrease in our imports of cellphones, a $1,097 million decrease in our imports of pharmaceutical preparations, and a $464 million decrease in our imports apparel and textiles other than those of wool or cotton, which were partly offset by a $698 million increase in our imports of toys, games, and sporting goods and a $466 million increase in our imports of art, antiques and other collectibles, while our imports of foods, feeds, and beverages fell by $444 million to $12,956 million on decreases in imports of several food and beverage line items…

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 December figures show surpluses, in billions of dollars, with South and Central America ($3.9), Hong Kong ($2.1), OPEC ($1.9), Brazil ($0.8), Saudi Arabia ($0.6), and United Kingdom ($0.2). Deficits were recorded, in billions of dollars, with China ($28.1), European Union ($19.2), Mexico ($10.3), Germany ($5.8), Japan ($5.5), Taiwan ($3.2), Italy ($3.2), India ($2.8), South Korea ($2.7), France ($1.6), Canada ($1.1), and Singapore ($0.9).

  • The deficit with China decreased $2.3 billion to $28.1 billion in December. Exports increased $0.8 billion to $13.5 billion and imports decreased $1.5 billion to $41.7 billion.
  • The deficit with Japan decreased $1.1 billion to $5.5 billion in December. Exports increased $0.3 billion to $5.5 billion and imports decreased $0.8 billion to $11.0 billion.
  • The deficit with the European Union increased $2.5 billion to $19.2 billion in December. Exports decreased $0.7 billion to $19.7 billion and imports increased $1.7 billion to $38.9 billion.

In the advance estimate of 4th quarter GDP published last week, our December trade deficit was estimated based on the sketchy Advance Report on our International Trade in Goods which was released just before the GDP release...that report estimated that our seasonally adjusted December goods trade deficit was at $82,466 million on a Census basis, on goods exports of $133,436 million and goods imports of $215,902 million...this report revises that and shows that our actual Census basis goods trade deficit in December was at $83,190 million, on adjusted goods imports of $216,444 million and adjusted goods exports of $133,254 million...at the same time, the November goods trade deficit was revised up from the $85,486 million indicated in that advance report to $86,113 million, and the October goods trade deficit was revised up from $80,358 million to $81,001 million…those revisions from the previously published figures would suggest that the 4th quarter trade deficit in goods was roughly $1.994 billion more than was accounted for in last week's GDP report, or around $8.0 billion greater on an annualized basis, which would subtract about 0.12 percentage points from 4th quarter GDP when the 2nd estimate is released at the end of this month....

Note that trade in goods for July, August, September and October, which all go into figuring the quarter over quarter change in 4th quarter GDP, were also revised with this report as well, and since our GDP growth rate is a measure of the change from one quarter to the next, we should also be adjusting for changes in those months as well to get an accurate 4th quarter read...however, the BEA will not revise 3rd quarter GDP figures until the annual revision this coming summer, so the 4th quarter GDP report that will be published at the end of March will not reflect the revised 3rd quarter trade figures included herein....however, since this month’s revisions are due to changes in the seasonal adjustments, the net trade deficit for the entirety of 2020 should not be affected... 

Construction Spending Rose 1.0% in December after Prior Months Were Revised Much Higher

The Census Bureau's report on construction spending for December (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,490.4 billion annually if extrapolated over an entire year, which was 1.0 percent (± 0.8 percent) above the revised November estimate of a $1,475.6 billion rate annually, and 5.7 percent (±1.0 percent) above the estimated annualized level of construction spending in December of last year...the annualized November construction spending estimate was revised 1.1% higher, from $1,459.4 billion to $1,475.6 billion, and the annual rate of construction spending for October was revised 0.8% higher, from $1,446.9 billion to $1,459.0 billion...for all of 2020, construction spending totaled $1,429.7 billion, 4.7 percent (±1.0 percent) above the $1,365.1 billion spent in 2019...

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

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,137.6 billion, 1.2 percent (±0.7 percent) above the revised November estimate of $1,124.4 billion. Residential construction was at a seasonally adjusted annual rate of $691.0 billion in December, 3.1 percent (±1.3 percent) above the revised November estimate of $670.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $446.6 billion in December, 1.7 percent (±0.7 percent) below the revised November estimate of $454.4 billion. The value of private construction in 2020 was $1,079.3 billion, 4.7 percent (±0.8 percent) above the $1,030.7 billion spent in 2019. Residential construction in 2020 was $607.6 billion, 11.6 percent (±2.1 percent) above the 2019 figure of $544.4 billion and nonresidential construction was $471.7 billion, 3.0 percent (±0.8 percent) below the $486.3 billion in 2019.
  • Public Construction: In December, the estimated seasonally adjusted annual rate of public construction spending was $352.8 billion, 0.5 percent (±1.3 percent)* above the revised November estimate of $351.1 billion. Educational construction was at a seasonally adjusted annual rate of $90.2 billion, 0.6 percent (±1.5 percent)* above the revised November estimate of $89.7 billion. Highway construction was at a seasonally adjusted annual rate of $98.4 billion, 0.9 percent (±3.5 percent)* above the revised November estimate of $97.5 billion. The value of public construction in 2020 was $350.5 billion, 4.8 percent (±1.6 percent) above the $334.4 billion spent in 2019. Educational construction in 2020 was $87.3 billion, 3.6 percent (±3.3 percent) above the 2019 figure of $84.3 billion and highway construction was $98.8 billion, 1.8 percent (±4.1 percent)* above the $97.1 billion in 2019

Construction spending for December was higher than was reported by the BEA in their advance estimate of 4th quarter GDP last week, while October's and November's annualized construction spending were revised $12.1 and $16.2 billion higher respectively...The BEA's key source data and assumptions (xls) accompanying last week's 4th quarter GDP report indicates that they had estimated that December's residential construction would increase by an annualized $13.9 billion from previously published figures, that nonresidential construction would decrease by an annualized $2.3 billion from last month's report, and that December's public construction would decrease by an annualized $0.2 billion from last month's report....hence, by totaling the changes of those BEA estimates, we find the BEA had estimated December construction spending to be $11.4 higher than previously reported November levels, which have now been revised $16.2 billion higher...since this report indicated that total construction spending for December was $14.8 billion higher than the revised November figure, that means the net of the annualized construction figures used for December in the GDP report was $12.8 billion too low...averaging the differences between the monthly annual rates in this report and those used in the GDP report for the three months of the 4th quarter would mean that this report suggests that construction spending in the 4th quarter GDP report was underestimated by $13.7 billion (at an annual rate), implying an upward revision to the related GDP components at a rate that should result in addition of about 0.27 percentage points to 4th quarter GDP when the 2nd estimate is released at the end of the month...

Factory Shipments Up 1.7% in December; Factory Inventories Up 0.3%

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for December from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $5.2 billion or 1.1 percent to $493.5 billion in December, following an increase of 1.3% to $488.3 billion in November, which was revised up from the 1.0% increase to $487.2 billion that was reported for November a month ago....however, since the Census Bureau does not even collect orders data on 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 December advance report on durable goods which was released last week...on those durable goods revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in December, up eight consecutive months, increased $5.2 billion or 1.1 percent to $493.5 billion, the U.S. Census Bureau reported today. This followed a 1.3 percent November increase. Shipments, also up eight consecutive months, increased $8.4 billion or 1.7 percent to $501.8 billion. This followed a 0.8 percent November increase. Unfilled orders, down nine of the last ten months, decreased $3.0 billion or 0.3 percent to $1,070.8 billion. This followed a virtually unchanged November decrease. The unfilled orders-to-shipments ratio was 6.28, down from 6.40 in November. Inventories, up four of the last five months, increased $2.1 billion or 0.3 percent to $695.7 billion. This followed a 0.8 percent November increase. The inventories-to-shipments ratio was 1.39, down from 1.41 in November.
  • New Orders for manufactured durable goods in December, up eight consecutive months, increased $1.2 billion or 0.5 percent to $246.4 billion, up from the previously published 0.2 percent increase. This followed a 1.3 percent November increase. Machinery, also up eight consecutive months, led the increase, $0.9 billion or 2.7 percent to $33.4 billion. New orders for manufactured nondurable goods increased $4.1 billion or 1.7 percent to $247.1 billion. 
  • Shipments of manufactured durable goods in December, up seven of the last eight months, increased $4.3 billion or 1.7 percent to $254.7 billion, up from the previously published 1.4 percent increase. This followed a 0.4 percent November increase. Transportation equipment, also up seven of the last eight months, led the increase, $2.5 billion or 3.1 percent to $85.1 billion. Shipments of manufactured nondurable goods, up eight consecutive months, increased $4.1 billion or 1.7 percent to $247.1 billion. This followed a 1.2 percent November increase. Petroleum and coal products, up seven of the last eight months, led the increase, $2.3 billion or 5.6 percent to $44.2 billion.
  • Unfilled orders for manufactured durable goods in December, down nine of the last ten months, decreased $3.0 billion or 0.3 percent to $1,070.8 billion, unchanged from the previously published decrease. This followed a virtually unchanged November decrease. Transportation equipment, down ten consecutive months, drove the decrease, $6.8 billion or 1.0 percent to $706.3 billion.
  • Inventories of manufactured durable goods in December, down following three consecutive monthly increases, decreased $1.0 billion or 0.2 percent to $425.6 billion, unchanged from the previously published decrease. This followed a 0.9 percent November increase. Transportation equipment, down following four consecutive monthly increases, drove the decrease, $2.8 billion or 1.9 percent to $147.9 billion. Inventories of manufactured nondurable goods, up four of the last five months, increased $3.1 billion or 1.1 percent to $270.2 billion. This followed a 0.7 percent November increase. Petroleum and coal products, up two consecutive months, led the increase, $1.4 billion or 4.3 percent to $32.9 billion. By stage of fabrication, December materials and supplies increased 0.5 percent in durable goods and 1.4 percent in nondurable goods. Work in process decreased 0.2 percent in durable goods and increased 1.1 percent in nondurable goods. Finished goods decreased 1.2 percent in durable goods and increased 0.9 percent in nondurable goods.

As you see above, inventories of durable goods were unchanged from the previously published decrease, which had been incorporated into last week's 4th quarter GDP report...on the other hand, the BEA's key source data and assumptions (xls) for 4th quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase by $1.6 billion on a Census basis in December before they estimated the 4th quarter’s output, so the actual $3.1 billion increase, following a $0.5 billion downward revision to November's non-durable goods inventories, would indicate that they underestimated the end of 4th quarter GDP inventory component by about $1.0  billion, which would be by around $4.0 billion on an annualized basis, which would suggest that 4th quarter GDP would have to be revised upwards by about 0.08 or 0.09 percentage points to account for what this report shows..

 

(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…)