Sunday, March 28, 2021

3rd estimate 4th quarter GDP; February’s income and outlays, durable goods, new home sales & existing home sales

The key economic reports released the past week were the 3rd estimate of 4th quarter GDP and the February report on Personal Income and Spending from the Bureau of Economic Analysis; other widely watched releases included the advance report on durable goods for February and the February report on new home sales, both from the Census bureau, and the Existing Home Sales Report for February from the National Association of Realtors (NAR)...we also had the release of the Chicago Fed National Activity Index (CFNAI) for February, a weighted composite index of 85 different economic metrics, which fell to –1.09 in February from +0.75 in January, which was revised from the +0.66 reported for January last month...as a result of the February decrease, the 3 month average of the CFNAI decreased to –0.02 in February from a revised +0.46 in January, which indicates that national economic activity has been ever so slightly below the historical trend over recent months...

In addition,  the week also saw the release of the Regional and State Employment and Unemployment Report for February from the Bureau of Labor Statistics, a report which breaks down the two employment surveys from the monthly national jobs report by state and region (Note: January's regional report was released last week, delayed in order to compile the annual revisions)....while the text of this report provides a useful summary of the state and regional data, the serious statistical aggregation can be found in the tables linked at the end of the report, where one can find the civilian labor force data and the change in payrolls by industry for each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands...

This week also saw the release of two more regional Fed manufacturing surveys for March: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose to +17 in March from +14 in February, suggesting an ongoing expansion in that region's manufacturing, and the Kansas City Fed manufacturing survey for March, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to +26 in March, up from +24 in February and from +17 in January, indicating the continuation of a broad based expansion in that region's manufacturing...

4th Quarter GDP Grew at a 4.3% Rate, Revised from a 4.1% Rate, on Greater Growth of Inventories

The Third Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 4.3% rate in the quarter, revised from the 4.1% growth rate reported in the second estimate last month, as inventories, exports, and government outlays were greater than was previously estimated, more than offsetting a downward revision to personal consumption expenditures....in current dollars, our fourth quarter GDP grew at a 6.27% 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 $21,494.7 billion annual rate in the 4th quarter, with the headline 4.3% annualized rate of increase in real output arrived at an annualized inflation adjustment averaging 2.0%, 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 GDP release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 3rd 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; and table 4, which shows the change in the price indexes for each of the components...the pdf for the 4th quarter second estimate, which this estimate revises, is here...

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from a growth rate of 2.4% to an overall 2.3% growth rate in this 3rd estimate…that growth rate figure was arrived at by deflating the 3.82% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated inflation grew at a 1.5% annual rate in the 4th quarter, which was revised from the 1.6% PCE inflation rate reported a month ago, and hence was a major factor in the downward revision to PCE....real consumption of durable goods shrank at a 1.1% annual rate, which was revised from the 0.6% contraction rate shown in the second estimate, and subtracted 0.09 percentage points from GDP, as consumption of motor vehicles, consumption of furniture and appliances and consumption of recreational goods and vehicles all decreased.....at the same time, real consumption of nondurable goods by individuals shrunk at a 1.6% annual rate, revised from the 1.1% contraction rate reported in the 2nd estimate, and subtracted 0.23 percentage points from the 4th quarter’s economic growth rate, as modest growth in real consumption of clothing and footwear was more than offset by lower consumption of food, gasoline and and other non-durable goods.....on the other hand, consumption of services grew at a 4.3% annual rate, revised from the 4.0% growth rate reported last month, and added 1.90 percentage points to the final GDP tally, as real consumption of health care services grew at a 14.3% rate and accounted for three-fourths of the quarter’s growth in services...

Meanwhile, seasonally adjusted real gross private domestic investment grew at a 27.8% annual rate in the 4th quarter, revised from the 26.5% growth estimate reported last month, as real private fixed investment grew at a 18.6% rate, revised from the 19.1% growth rate reported in the second estimate, while inventory growth was greater than previously estimated...investment in non-residential structures was revised to show contraction at a 6.2% rate, revised from the 1.1% growth rate previously reported, while real investment in equipment grew at 25.4% rate, revised from the 25.7% growth rate shown a month ago...meanwhile the quarter's investment in intellectual property products was revised from growth at a 8.4% rate to growth at a 10.5% rate, while at the same time real residential investment was shown to be growing at a 36.6% annual rate, revised from 35.8% in the previous report....after those revisions, the decrease in investment in non-residential structures subtracted 0.17 percentage points from the 4th quarter's growth rate, while the increase in investment in equipment added 1.32 percentage points to the quarter's growth rate, the increase in investment in intellectual property added 0.49 percentage points to the growth rate of 4th quarter GDP, and the increase in residential investment added 1.39 percentage points to the growth rate 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 of real private inventories was revised from the previously reported $48.0 billion in inflation adjusted growth to show that inventory grew at an inflation adjusted $62.1 billion rate….that came after inventories had contracted at an inflation adjusted $3.7 billion rate in the 3rd quarter, and hence the $65.8 billion positive change in real inventory growth from the 3rd to the 4th quarter added 1.37 percentage points to the 4th quarter's growth rate, revised from the 1.11 percentage point addition to GDP from inventory growth reported in the second estimate....however, since a greater growth of inventories indicates that more of the goods produced during the quarter were left in a warehouse or sitting on a shelf, their increase at a $65.8 billion rate conversely meant that real final sales of GDP were actually smaller by that much, and hence real final sales of GDP grew at a 2.9% rate in the 4th quarter, revised from the 3.0% real final sales growth shown in the second 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 higher with this estimate, while the previously reported increase in real imports was revised higher by a bit less, so on net the change in our net trade was a smaller subtraction from GDP rather than was previously reported.....our real exports grew at a 22.3% rate, revised from the 21.8% growth rate reported in the second 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 and hence not captured by another GDP metric, that growth added 2.04 percentage points to the 4th quarter's growth rate, revised from the 2.00 percentage point addition shown in the previous report....meanwhile, the previously reported 29.6% growth rate in our real imports was revised to a 29.8% 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 shouldn't have been because it was not produced here, their increase subtracted 3.57 percentage points from 4th quarter GDP, rather than the 3.55 percentage point subtraction shown last month....thus, that slight improvement in our deteriorating trade balance subtracted a net of 1.53 percentage points from 4th quarter GDP, rather than the 1.55 percentage point subtraction that had been indicated by the second estimate..

Finally, there was also an upward revision to real government consumption and investment in this 3rd estimate, as the real contraction rate for the entire government sector was revised from a 1.1% rate to a 0.8% rate.....real federal government consumption and investment was seen to have shrunk at a 0.9% rate in this estimate, unchanged from the second estimate, as real federal outlays for defense grew at a 4.8% rate and added 0.20 percentage points to 4th quarter GDP, revised from the 4.7% growth rate shown previously, while all other federal consumption and investment shrunk at an unrevised 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 1.2% rate in the second estimate to shrinking at a 0.8% rate in this estimate, as state and local investment spending grew at a 7.8% rate and added 0.16 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 there had been an increase in the output of those goods or services...

Personal Income down 7.1% in February, Personal Spending down 1.0%, PCE Price Index up 0.2%

The February report on Personal Income and Outlays from the Bureau of Economic Analysis gives us nearly half the data that will go into 1st quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, and 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....this report also provides us with the nation's personal income data, disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds into GDP and other national accounts data, the change reported for each of those metrics are not the current monthly change; rather, they're seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase in a year if February’s 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 January to February...

Hence, when the opening line of the press release for this report tell us "Personal income income decreased $1,516.6 billion (7.1 percent) in February", that means that the annualized figure for US personal income in February, $19,945.6 billion, was $1,516.6 billion, or roughly 7.1% less than the annualized personal income figure of $21,462.2 billion for January; the actual change in personal income from January to February is not provided...similarly, annualized disposable personal income, which is income after taxes, fell by nearly 8.0%, from an annual rate of an annual rate of $19,210.5 billion in January to an annual rate of $17,678.2 billion in February...the components of the monthly decrease in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized figures...in February, the reason for the $1,516.6 billion annualized decrease in personal income was a $1,584.1 billion annualized decrease in government social benefits to individuals, which was only slightly offset by a $37.7 billion annualized increase in business & farm proprietors’ income and a $15.6 billion annualized increase in interest and dividend income...wages and salaries, which fell by an annualized $0.2 billion, were barely a factor in February's personal income change...

For the personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they decreased at a $149.0 billion annual rate, or by nearly 1.0 percent, as the annual rate of PCE fell from $14,939.1 billion in January to $14,790.1 in February, after the January PCE rate was revised down from the originally reported $14,816.8 billion annually...the current dollar decrease in February spending resulted from a $155.9 billion decrease to $ 5,018.9 billion in spending for goods, a decrease which was evident in last week's February retail sales report, which was only slightly offset by a $7.0 billion annualized increase to $9,771.2 billion in annualized in spending for services....total personal outlays for February, which includes interest payments and personal transfer payments in addition to PCE, fell by an annualized $141.5 billion to $15,267.7 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $2,410.4 billion annual rate in February, down from the revised $3,801.3 billion in annualized personal savings in January... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 13.6% in February from January's savings rate of 19.8%, which was still up from the saving rate of 8.3% in February of last year and still higher than any personal savings rate of the entire 1975 to 2019 period...

Before 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...the BEA does that by computing a price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is included in Table 9 in the pdf for this report....that PCE price index rose from 112.481 in January to 112.740 in February, a month over month inflation rate that's statistically 0.23026%, which BEA reports as an increase of 0.2 percent, following the PCE price index increase of 0.3% that they reported for January...then, applying that 0.23026% inflation adjustment to the decrease in February PCE shows that real PCE fell by 1.22482% in February, which the BEA reports as a 1.2% decrease......notice 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 PDF, where we see that February's chained dollar consumption total works out to 13,119.2 billion annually, 1.22497% less than January's 13,281.9 billion, statistically the same as the real PCE decrease we just computed...

Finally, to estimate the impact of the change in PCE on the change in GDP, we have to compare real PCE from January and February to the the real PCE of the 3 months of the fourth quarter....while this report shows PCE for all those months on a monthly basis, the BEA also provides the annualized chained dollar PCE on a quarterly basis in table 8 in the pdf for this report, where we find that the annualized real PCE for the 3 months of the 4th quarter was represented by 12,999.1 billion in chained 2012 dollars...(note that's the same figure shown in table 3 of the pdf for the 4th quarter GDP report)....then, by averaging the annualized chained 2012 dollar PCE figures for January and February, 13,281.9 billion and 13,119.2 billion, we get an equivalent annualized PCE for the two months of the 1st quarter that we have the data for so far....when we compare that average of 13200.55 to the 4th quarter chained dollar PCE of 12,999.1, we find that 1st quarter real PCE has grown at a 6.34% annual rate for the two months of the 1st quarter included in this report (note the math to get that annual rate: ((( 13,281.9 +13,119.2 ) / 2 ) /12,999.1 ) ^ 4 = 1.063445...growth at that rate means that if March real PCE does not improve from the average of January and February, which seems unlikely, growth in PCE would still add 4.39 percentage points to the growth rate of the 1st quarter...

February Durable Goods: New Orders Down 1.1%, Shipments Down 3.5%, Inventories Up 0.7%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for February (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods decreased by $2.9 billion or 1.1 percent to $254.0 billion in February, the first decrease in 10 months, after January's new orders were revised from the $256.6 billion reported last month to $256.9 billion, now a 3.5% increase from December's new orders…as a result, year to date new orders are still up by 3.4% from those of 2020...

The volatile monthly new orders for transportation equipment led February’s new orders decrease, as the value of new transportation equipment orders fell $1.3 billion or 1.6 percent to $83.6 billion, despite a 103.3% increase to $9,504 million in new orders for defense aircraft, as the value of new orders for motor vehicles and parts fell 8.7% to $57,588 million...excluding orders for transportation equipment, other new orders fell 0.9%, while excluding just new orders for defense equipment, new orders fell  0.7%....meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, were also weak, falling by $563 million or 0.8% to $72,480 million...

Over the same period, the seasonally adjusted value of February’s shipments of durable goods, which will ultimately be included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, fell for the first time in six months, decreasing by $9.1 billion or 3.5 percent to $250.9 billion, after the value of January shipments was revised from $513.3 billion to $512.2 billion, now up 1.7% from December, rather than the 2.0% increase reported a month ago....lower shipments of transportation equipment were mostly responsible for the February shipments decrease, as they decreased by $7.0 billion or 8.2 percent to $78.6 billion, on an 8.9% decrease to $57,196 million in the value of shipments of motor vehicles and parts....meanwhile, the value of shipments of nondefense capital goods less aircraft fell 1.0% to $71,281 million, after January’s capital goods shipments were revised down from $72,054 million to $71,966 million...

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $2.8 billion or 0.7 percent to $427.3 billion, the first increase in three months, after the value of January inventories was revised from $424.3 billion to $424.5 billion, still down 0.3% from December....the value of inventories of transportation equipment rose $0.9 billion or 0.6 percent to $146.6 billion, led by a 2.6% increase to $41,612 in inventories of motor vehicles and parts, while the value of all other inventories rose 0.7% to $280,654 million...

Finally, the value of unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but often very volatile new orders, rose for the second consecutive month after failing to rise over the prior ten, increasing by $8.4 billion or 0.8 percent to $1,082.0 billion, following a 0.2% January increase to $1,073.65 billion, which was revised from the previously reported 0.1% increase to $1,072.6 billion....a $5.0 billion or 0.7 percent increase to $711.1 billion in unfilled orders for transportation equipment led the February increase, while unfilled orders excluding transportation equipment orders were up 0.9% to $370,865 million...however, the unfilled order book for durable goods is still 5.7% below the level of last February, with unfilled orders for transportation equipment 10.9% below their year ago level, mostly due to a 15.5% decrease in the backlog of orders for commercial aircraft and parts...

February New Home Sales Reported 18.2% Lower After Prior Month's Sales Revised Higher

The Census report on New Residential Sales for February (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 775,000 homes annually during the month, which was 18.2 percent (±13.9 percent) the revised January annual sales rate of 948,000 new home sales, but 8.2 percent (±21.7 percent)* above the estimated annual rate that new homes were selling at in February of last year....the asterisk indicates that based on their small sampling, Census could not be certain whether February new home sales rose or fell from the February sales rate of a year ago, with the figures in parenthesis representing the 90% confidence range for the 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 January were revised from the annual rate of 923,000 reported last month to an annual rate of 948,000, and new home sales in December, initially reported at an annual rate of 842,000 and revised up to a 885,000 rate last month, were revised up to a 919,000 a year rate with this report, while November's annualized new home sales rate, initially reported at an annual rate of 841,000 and revised from a 829,000 rate to a 839,000 a year rate last month, were revised up to a 857,000 annual rate with this release...

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 64,000 new single family homes sold in February, down from the estimated 75,000 new homes that sold in January but up from the 62,000 that sold in December, and up from 63,000 in February a year ago...the raw numbers from Census field agents further estimated that the median sales price of new houses sold in February was $349,400, down from the median sale price of $353,200 in January and down from the median sales price of $351,800 in February a year ago, while the average February new home sales price was $416,000, up from the $410,400 average sales price in January, and up from the average sales price of $386,200 in February a year ago....a seasonally adjusted estimate of 312,000 new single family houses remained for sale at the end of February, which represents a 4.8 month supply at the February sales rate, up from the revised 4.2 months months of new home supply in January...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales decrease to 775,000 Annual Rate in February and A few Comments on February New Home Sales..

Existing Home Sales Fell 6.6% in February

The National Association of Realtors (NAR) reported that existing home sales decreased by 6.6% from January to February on a seasonally adjusted basis, projecting that 6.22 million existing homes would sell over an entire year if the February home sales pace were extrapolated over that year, a pace that was still 9.1% above the annual sales rate projected in February of last year....at the same time, the January home sales pace was revised from the 6.69 million annual rate reported a month ago to a 6.66 million rate with this report, which means that February home sales actually fell by 6.7%...the NAR also reported that the median sales price for all existing-home types was $313,000 in February, 15.8% higher than in February a year earlier, which they report "marks 108 straight months of year-over-year gains", and that the inventory of homes for sale was at a record-low of 1.03 million units, down by a record 29.5% from a year ago.....the NAR press release, which is titled "Existing-Home Sales Descend 6.6% in February", is in easy to read plain English, so if you're interested in further details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually happened with home sales during the month...this unadjusted data indicates that roughly 364,000 homes sold in February, down 0.5% from the revised 366,000 homes that sold in January, and 8.7% more than the 335,000 homes that sold in February of last year....that same pdf indicates that the median home selling price for all housing types rose by 3.1%, from a revised $303,600 in January to $313,000 in February, while the average home sales price rose by 1.9% to $344,200 from the $337,800 average sales price in January, which was also up by 12.6% from the $305,800 average home sales price of February 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 Decreased to 6.22 million in February and Comments on February 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, March 21, 2021

February’s retail sales, industrial production, & housing construction; January’s business inventories

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

This week also saw the release of the first two regional Fed manufacturing surveys for March: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from +12.1 in February to +17.4 in March, it's highest since last summer, suggesting a broader based expansion of First District manufacturing... meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions jumped to a 50+ year high of +51.8 in March from + 23.1 in February, indicating a substantial majority of that region's manufacturing firms are seeing increased activity this month...

Retail Sales Fell 3.0% in February After January Sales Revised 1.9% Higher

Seasonally adjusted retail sales decreased 3.0% in February after retail sales for January were revised 1.9% higher...the Advance Retail Sales Report for February (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $561.7 billion during the month, which was 3.0 percent (±0.5%) lower than January's revised sales of $579.1 billion, but still 6.3 percent (±0.7 percent) above the adjusted sales in February of last year...January's seasonally adjusted sales were revised up from $568.2 billion to $579.1 billion, while December's sales were revised from $539.7 billion down to $538,338 million; as a result, the December to January change was revised up from up 5.3 percent (±0.5 percent) to up 7.6% (±0.3%)...the downward revisions to December sales would indicate that 4th quarter personal consumption expenditures will be revised lower at about a $5.5 billion annual rate, which would thereby reduce 4th quarter GDP by about 0.11 percentage points...estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were down 5.4%, from $519,588 million in January to $491,356 million in February, while they were up 2.4% from the $479,868 million of sales in February of a year ago..  

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the February 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 January revised figure to this month's February "advance" report in the first sub-column, and then the year over year percentage sales change since last February is in the 2nd column...the second double column pair below gives us the revision of the January advance estimates (now called "preliminary") as of this report, with the new December to January percentage change under "Dec 2020 (r)" (revised) and the January 2020 to January 2021 percentage change as revised in the last column shown...for your reference, our copy of the table of last month’s advance estimate of January sales, before this month's revisions, is here, should you be interested in more detail in how January sales were revised.….

February 2021 retail sales table

To compute February's real personal consumption of goods data for national accounts from this February retail sales report, the BEA will use the corresponding price changes from the February 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 February retail sales excluding the 3.6% price-related increase in sales at gas station were down by 3.5%....then, subtracting the figures representing the insignificant increase in grocery & beverage store sales and the 2.5% decrease in food services sales from that total, we find that core retail sales were down by roughly 4.25% for the month...since the CPI report showed that the composite price index for all goods less food and energy goods was 0.1% higher in February, we can thus approximate that real retail sales excluding food and energy will on average be down by roughly 4.35%.....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 motor vehicle and parts dealers were down 4.2%, the price index for transportation commodities other than fuel was 0.4% lower, which would suggest that real sales at vehicle and parts dealers fell by roughly 3.8%...similarly, while nominal sales at clothing stores were 2.8% lower in February, the apparel price index was 0.7% lower, which means that real sales of clothing fell around 2.1%...on the other hand, while nominal sales at sporting goods, hobby, music and book stores fell 7.5%, the price index for recreational commodities rose 0.5%, so we can figure real sales of recreational goods were down by roughly 8.0%....

In addition to figuring those core retail sales, we should also adjust food and energy retail sales for their price changes separately…the February CPI report showed that the food price index was 0.4% higher, with the index for food purchased for use at home 0.3% higher, while prices for food bought to eat away from home (other than at employee sites and schools) were 0.4% higher... thus, while nominal sales at food and beverage stores were unchanged, real sales of food and beverages would be roughly 0.3% lower in light of the 0.3% higher prices…meanwhile, the 2.5% decrease in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants fell about 2.9% during the month....on the other hand, while sales at gas stations were up 3.6%, there was a 6.4% increase in the retail price of gasoline during the month, which would suggest that real sales of gasoline were down on the order of 2.6%, 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, but leaving out real restaurant and bar sales, we can then estimate that the income and outlays report for February will show that real personal consumption of goods fell by more than 3.6% in February, after rising by a revised 7.4% in January, but after falling by a revised 2.1% in December...at the same time, the 2.9% decrease in real sales at bars and restaurants would reduce the growth rate of February’s real personal consumption of services by almost 0.3%...

Industrial Production Falls 2.2% in February After Prior Months Revised Lower

The Fed's February G17 release on Industrial production and Capacity Utilization reported that industrial production decreased by 2.2% in February after rising by a revised 1.1% in January, which left industrial output 4.2% lower than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was at 104.7 in February, after the January index was revised down from 107.2 to 107.1, the December index was revised down from 106.2 to 105.8, the November index was revised down from 104.9 to 104.8, and the October index was revised down from 103.9 to 103.8...

The manufacturing index, which accounts for more than 77% of the total IP index, fell 3.1% to 100.7 in February, mostly due to damage to petroleum refineries, petrochemical facilities, and plastic resin plants from the February deep freeze, without which manufacturing would have only been down about a half percent...that came after the manufacturing index for January was revised down from 103.9 to 103.8,  the manufacturing index for December index was revised down from 102.8 to 102.6, and the manufacturing index for November index was revised down from 101.9 to 101.8, leaving the manufacturing index 0.4% below its year ago level....meanwhile, the mining index, which includes oil and gas well drilling, fell 5.4%, from 119.0 in January to 112.6 in February, after the January index was revised down from 119.6, which left the mining index 15.3% below where it was a year earlier......finally, the utility index, which often fluctuates due to above or below normal temperatures, rose by 7.4% in our cold February, from 104.8 to 112.5, after our warmer January’s utility index was revised from 105.1 to 104.8, now down 0.6% from December...with this February's temperatures much below the already cooler levels seen across much of the US last February, the utility index is now 10.1% 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 fell to 73.8% in February from 75.5% in January, which was revised down from the 75.6% reported last month ...capacity utilization of NAICS durable goods production facilities fell from a revised 73.8% in January to 71.9% in February, while capacity utilization for non-durables producers fell from a downwardly revised 76.7% to 73.9%...capacity utilization for the mining sector fell to 77.5% in February from 81.8% in January, which was originally reported as 82.2%, while utilities were operating at 78.5% of capacity during February, up from their 73.3% of capacity during January, which was previously reported at 73.5%...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..

Housing Starts, Permits Reported Much Lower in February

The February report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in February was at a seasonally adjusted annual rate of 1,421,000, which was 10.3 percent (±10.5 percent)* below the revised estimated January annual rate of 1,584,000, and was 9.3 percent (±9.4 percent)* below last February's rate of 1,567,000 housing starts a year...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, February housing starts could have been up by 0.2% or down by as much as 20.8% from those of January, with revisions of a greater magnitude in either direction still possible...in this report, the annual rate for January housing starts was revised from the 1,580,000 reported last month to 1,584,000, while December starts, which were first reported at a 1,669,000 annual rate, were revised from last month's initial revised figure of 1,680,000 annually back down to a 1,670,000 annual rate with this report....

The annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 100,700 housing units were started in February, down from the 111,000 units that were started in January and down from the 115,100 units that were started in December....of those housing units started in February, an estimated 72,200 were single family homes and 27,800 were units in structures with more than 5 units, down from the revised 77,100 single family starts in January. and down from the 33,000 units started in structures with more than 5 units...

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 February, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,682,000, which was 10.8 percent (±1.0 percent) below the revised January rate of 1,886,000 permits, but was 17.0 percent (±1.4 percent) above the rate of building permit issuance in February a year earlier...the annual rate for housing permits issued in January was a 14 year high for building permits and was revised up from the originally reported 1,881,000....

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 117,200 housing units were issued in February, down from the revised estimate of 128,800 new permits issued in January....of those permits issued in February, 80,900 were permits for single family homes and 33,200 were permits for units in structures of more than 5 units, down from the 83,900 single family permits in January, and down from the 41,300 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 1.421 Million Annual Rate in February and Comments on February Housing Starts...

January Business Sales Up 4.7%, Business Inventories Up 0.3%

After the release of the February retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for January (pdf), which incorporates the revised January retail data from that February report and the earlier published January 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 $1,568.5 billion in January, up 4.7 percent (±0.3 percent) from December's revised sales, and 7.1 percent (±0.4 percent) higher than January sales of a year earlier...note that total December sales were concurrently revised up from the originally reported $1,494.2 billion to $1,497.953 billion, now a 1.0% increase from November, rather than the 0.8% increase previously reported....manufacturer's sales rose 1.9% to $513,268 million in January, and retail trade sales, which exclude restaurant & bar sales from the revised January retail sales reported earlier, rose 7.4% to $523,540 million, while wholesale sales rose 4.9% to $531,726 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,982.4 billion at the end of January, up 0.3% (±0.1%) from the end of December, but still 1.8 percent (±0.3 percent) lower than in January a year earlier...at the same time, the value of end of December inventories was revised from the $1,971.7 billion reported last month to $1,976.5 billion, now up 0.8% from November, rather than the 0.6% increase reported last month....seasonally adjusted inventories of manufacturers were estimated to be valued at $696,267 million, up 0.1% from December, while inventories of retailers were valued at $624,353 million, down 0.5% from in December, while inventories of wholesalers were estimated to be valued at $661,736 million at the end of January, 1.3% higher than in December...

For GDP purposes, all these inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for January, which indicated finished goods prices were 1.3% higher...two weeks ago, we looked at real factory inventories with producer price adjustments for goods at various stages of production, and judged those inventories would have a significant negative impact on 1st quarter GDP…then last week, we found that January's wholesale inventories decrease alone would have a modest negative impact on 1st quarter GDP….since the nominal value of retail inventories for January has now been shown to be 0.5% lower, real retail inventories for the month, after the 1.3% finished goods price adjustment, thus would have thus decreased by 1.8% from December, after a fourth quarter that saw real retail inventories increase substantially...therefore, what is shaping up to be a large real retail inventory decrease in the 1st quarter to date would have a much larger negative impact on 1st quarter GDP, first by subtracting the big decrease in first quarter real retail inventories, and then by subtracting the amount of their 4th quarter increase…

 

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

Sunday, March 14, 2021

February’s consumer and producer prices, January's wholesale trade and JOLTS

Major reports released this week included the February Consumer Price Index, the February Producer Price Index and the Job Openings and Labor Turnover Survey (JOLTS) report for January, all from the Bureau of Labor Statistics, and the January report on Wholesale Trade, Sales and Inventories from the Census Bureau....in addition, this week also saw the Mortgage Monitor for January from Black Knight Financial Services, which indicated that 5.85% of all mortgages were delinquent in January, down from 6.08% in December, but up from 3.22% in January of 2020, and that a record low of 0.32% of all mortgages were in the foreclosure process, down from the 0.33% that were in foreclosure in December and down from the 0.46% of mortgages that were in foreclosure a year earlier...

CPI Rose 0.4% in February on Higher Prices for Energy and Medical Services

The consumer price index rose 0.4% in February, as higher prices for fuel, groceries, utilities,and medical services were only partly offset by lower prices for clothing, used vehicles, and airline fares...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.4% higher in February, after rising by 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.2% in September, 0.4% in August, by 0.5% in July and by 0.5% in June, 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, of last year....the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 261.582 in January to 263.014 in February, which left it statistically 1.6762% higher than the 258.678 reading of February of last year, which is reported as a 1.7% year over year increase, up from the 1.4% year over year increase reported a month ago....with higher prices for energy and foods both factors in the overall index increase, seasonally adjusted core prices, which exclude food and energy, were up just 0.1% for the month, as the unadjusted core price index rose from 269.755 to 270.696, which left the core index 1.2826% ahead of its year ago reading of 267.268, which is reported as a 1.3% year over year increase, down from the 1.4% year over year core price increase that was reported for January and the 1.6% the year over year core price increase that was reported for December...

The volatile seasonally adjusted energy price index rose 3.9% in February, after rising by 3.5% in January, 2.6% in December, 0.7% in November, 0.6% in October, 1.4% in September, 0.9% in August, 2.1% in July, and by 4.4% in June, but after falling by 2.3% in May, by 9.5% in April, 5.8% in March, and by 2.5% last February, and hence is only 2.4% higher than in February a year ago...the price index for energy commodities was 6.6% higher in February, while the index for energy services was 0.9% higher, after falling 0.3% in January....the energy commodity index was up 6.6% on a 6.4% increase in the price of gasoline and a 9.9% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 7.3% higher...within energy services, the price index for utility gas service rose 1.6% after falling 0.4% in January and is now 6.7% higher than it was a year ago, while the electricity price index rose 0.7% after falling 0.2% in January....energy commodities are now averaging 1.6% higher than their year ago levels, with gasoline price averaging 1.5% higher than they were a year ago, while the energy services price index is now up 3.2% from last February, as electricity prices are also 2.3% higher than a year ago…

The seasonally adjusted food price index rose 0.2% in February, after rising by 0.1% in January and 0.3% in December, after being unchanged in November, rising 0.2% in October, rising 0.1% in August and in September, after falling 0.3% in July, rising 0.5% in June, 0.7% in May, 1.4% in April, 0.3% in March, and by 0.3% last February, as the price index for food purchased for use at home was 0.3% higher in January, after falling 0.1% in January, while the index for food bought to eat away from home was 0.1% higher, as average prices at fast food outlets rose 0.4% and prices at full service restaurants rose 0.3%, while food prices at employee sites and schools averaged 12.2% lower...notably, the price index for food at elementary and secondary schools was down 13.7% and is now down 32.5% from a year ago...

In the food at home categories, the price index for cereals and bakery products was 0.3% higher even as average bread prices fell 0.2%, as the price index for fresh biscuits, rolls, muffins rose 2.0%, the price index for crackers and bread and cracker products rose 2.3% and the price index for frozen and refrigerated bakery products, pies, tarts, and turnovers rose 1.9%....the price index for the meats, poultry, fish, and eggs food group was also 0.3% higher as the price index for beef and veal rose 0.4%, the price index for pork rose 1.0%, the price index for fresh fish and seafood rose 0.7%, and egg prices rose 2.2%...on the other hand, the seasonally adjusted price index for dairy products was 0.2% lower, as whole milk prices fell 1.4% and the price index for cheese and related products was 0.5% lower....however, the fruits and vegetables price index was 0.7% higher as the price index for fresh fruits rose 1.8% and tomato prices rose 1.6%....meanwhile, the beverages price index was 0.1% lower as the price index for carbonated drinks fell 0.5% and the price index for coffee fell 0.4%....lastly, the price index for the ‘other foods at home’ category was 0.1% higher, as the price index for sugar and sugar substitutesrose 0.9%, the price index for margarine rose 2.8%, the price index for snacks rose 1.7%, and the price index for olives, pickles and relishes rose 1.8%...the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last February, 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 rose 0.1% in February after being unchanged in January and December, after rising by 0.2% in November, by 0.1% in October, by 0.2% in September, by 0.3% in August, by 0.5% in July and by 0.2% in June, after falling by 0.1% in May, by 0.4% in April and being unchanged  in March, but after rising by 0.2% last February, the composite price index of all goods less food and energy goods was 0.2% lower in February, while the more heavily weighted composite for all services less energy services was 0.2% higher....

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust February's retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.1% lower even as the price index for appliances rose 1.9%, as the price index for bedroom furniture fell 1.4%, the price index for window coverings fell 1.2%, and the price index for housekeeping supplies fell 1.4%....meanwhile, the apparel price index was 0.7% lower on a 5.4% decrease in the price index for men's shirts and sweaters, a 4.9% decrease in the price index for women's dresses, a 2.3% decrease in the price index for girls' apparel, and a 2.0% decrease in the price index for boys' apparel....at the same time, the price index for transportation commodities other than fuel was 0.4% lower as prices for new cars were unchanged, prices for used cars and trucks fell 0.9%, and the price index for vehicle parts and equipment other than tires was 0.8% lower...meanwhile, the price index for medical care commodities 0.7% lower, as prescription drug prices fell 0.7% and nonprescription drug prices fell 0.6% while the price index for medical equipment and supplies rose 0.4%...on the other hand, the recreational commodities index was 0.5% higher on a 1.3% increase in TV prices, a 2.0% increase in the price index for sports vehicles including bicycles, a 1.1% increase in the price index for photographic equipment and supplies, and a 2.3% increase in the price index for sewing machines, fabric and supplies...however, the education and communication commodities index was 0.2% lower on a 1.8% decrease in the price index for telephone hardware, calculators, and other consumer information items and a 0.4% decrease in the price index for computer software and accessories….lastly, a separate price index for alcoholic beverages was 0.1% higher, while the price index for ‘other goods’ was up 0.3% on a 0.3% increase in the price index for Cosmetics, perfume, bath, nail preparations and implements and a 0.7% increase in cigarette prices...

Within core services, the price index for shelter was 0.2% higher as rents rose 0.2% and homeowner's equivalent rent was 0.3% higher, while prices for lodging away from home at hotels and motels fell 2.7%, 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 0.3% higher on a 0.8% increase in the price index for repair of household items and a 0.7% 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 2.0% and the price index for Eyeglasses and eye care rose 0.5%....on the other hand, the transportation services price index was 0.1% lower even though car and truck rentals rose 7.4% and the price index for intracity mass transit rose 4.3% because as airline fares fell 5.1%...however, the recreation services price index rose 0.6% as the index for video discs and other media, including rentals rose 2.9% and the price index for admissions to sporting events rose 4.9%.... at the same time, the index for education and communication services was 0.1% higher as the price index delivery services rose 0.8% and the price index for land-line telephone services rose 1.0%...lastly, the index for other personal services was up 0.5% as the price index for checking accounts and other bank services rose 4.0% while the price index for funeral expenses was 0.6% higher...

Among core line items, the price index for telephone hardware, calculators, and other consumer information items, which is now down by 17.9% since last January, the price index for men's suits, sport coats, and outerwear, which is now down 16.8% from a year ago, the price index for women's dresses, which has also fallen by 16.8% in the past year, the price index for checking account and other bank services, which is down by 10.3% from a year ago, the price index for lodging away from home including hotels and motels, which has fallen by 17.2% in the past year, the price index for admission to sporting events, which is still down by 14.1% from a year ago, and airline fares, which are now down by 25.6% since last February, have all seen prices drop by more than 10% over the past year, while the price index for car and truck rental, which has risen 11.5% from a year ago, and the price index for laundry equipment, which is up 24.3% from last February, are the only line items to have increased by a double digit magnitude over that span.... 

Producer Prices rose 0.5% in February on Higher Wholesale Food & Energy Prices

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.5% in February, as prices for finished wholesale goods were on average 1.4% higher, while margins of final services providers increased by 0.1%...that followed a January report that had the PPI 1.3% higher, with average prices for finished wholesale goods rising 1.4%, while margins of final services providers increased by 1.3%, a December report that indicated the PPI was up 0.3%, with prices for finished wholesale goods up 1.0% while margins of final services providers were 0.1% lower, a revised November report that now shows the PPI was unchanged, with prices for finished wholesale goods rising 0.4% while margins of final services providers decreased 0.3%, and a revised October report that now indicates the PPI was 0.6% higher, with prices for finished wholesale goods rising 0.5% and margins of final services providers rising 0.7%....on an unadjusted basis, producer prices are now 2.8% higher than a year ago, up from the 1.7% year over year increase indicated by last month's report, while, the core producer price index, which excludes food, energy and trade services, rose by 0.2% for the month, and is now 2.2% higher than in February a year ago, up from the 2.0% year over year increase as was shown in January...

As noted, the price index for final demand for goods, aka 'finished goods', was 1.4% higher in February, after being 1.4% higher in January, 1.0% higher in December, 0.4% higher in November, 0.5% higher in October, 0.4% higher in September, 0.4% higher in August, 0.5% higher in July, 0.4% higher in June, 1.4% higher in May, 2.8% lower in April, 1.7% lower in March, and 0.7% lower in February of last year...the finished goods price index rose 1.4% in February because the price index for wholesale energy goods was 6.0% higher, after it had risen by 5.1% in January, 4.9% in December, 1.5% in November, and by 0.5% in October, while the price index for wholesale foods rose 1.3%, after rising by 0.2% in January, falling 0.2% in December, rising by a revised 0.4% in November, by a revised 2.1% in October, and by 1.7% in September, and while the index for final demand for core wholesale goods (excluding food and energy) was 0.3% higher, after rising by 0.8% in January....wholesale energy prices averaged 6.0% higher due to a 13.1% increase in wholesale prices for gasoline, a 14.9% increase in wholesale prices for No.2 diesel fuel, and a 12.7% increase in wholesale prices for liquefied petroleum gas...meanwhile, the wholesale food price index rose 1.3% on a 41.1% increase in the wholesale price index for eggs for fresh use, an 13.0% increase in the wholesale price index for beef and veal, and a 7.0% increase in wholesale price index for fin-fish and shellfish....among core wholesale goods, the wholesale price index for industrial chemicals rose 4.2%,the wholesale price index for toys, games, and children's vehicles rose 2.5%, and the wholesale price index for mobile homes rose 2.1%, while the wholesale price index for iron and steel scrap fell 10.3% ..

At the same time, the index for final demand for services rose 0.1% in February, after rising 1.3% in January, after falling by 0.1% in December, falling by 0.3% in November, and rising by 0.7% in October, as the index for final demand for trade services rose 0.1%, the index for final demand for transportation and warehousing services rose 1.1%, and the core index for final demand for services less trade, transportation, and warehousing services was unchanged...among trade services, seasonally adjusted margins for hardware, building materials, and supplies retailers rose 8.1%, margins for TV, video, and photographic equipment and supplies retailers rose 11.3%, and margins for furniture retailers rose 6.4%, while margins for apparel, jewelry, footwear, and accessories retailers fell 6.5%.. among transportation and warehousing services, average margins for air transportation of passengers rose 3.7% while average margins for rail transportation of freight and mail rose 0.8%...among the components of the core final demand for services index, the index for securities brokerage, dealing, and investment advice rose 5.8%, the index for passenger car rental rose 3.6%, and margins for consumer loans rose 2.5%, while margins for application software publishing fell 3.5%…

This report also showed the price index for intermediate processed goods rose 2.7% in February, after rising 1.7% in January, 1.4% in December, a revised 0.8% in November, a revised 0.9% in October, 0.6% in September, 0.9% in August, 1.4% in July, and 1.2% in June, but after being unchanged in May and falling the prior 5 months....the price index for intermediate energy goods rose 6.5%, as refinery prices for gasoline rose 13.1%, refinery prices for No. 2 diesel fuel rose 14.9%, producer prices for liquefied petroleum gas rose 12.7%, and producer prices for natural gas to electric utilities rose 8.8%... meanwhile, the price index for intermediate processed foods and feeds rose 2.2%, as the producer price index for fats and oil rose 3.7%, the producer price index for processed poultry rose 6.1%, and the producer price index for meats rose 5.2%...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 plastic resins and materials rose 5.3%, the producer price index for steel mill products rose 11.8%, the producer price index for secondary nonferrous metals rose 8.8%, and the producer price index for softwood lumber rose 5.3%...prices for intermediate processed goods are now 6.6% higher than in February a year ago, the third 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 February, after rising 3.8% in January, 2.2% in December, a revised 6.4% in November, a revised 1.3% in October, 5.2% in September, 4.0% in August, 0.6% in July, 5.4% in June and 8.4% in May, but after falling 13.7% in April, 8.1% in March and by 6.5% last February....that was as the February price index for crude energy goods rose 9.8% as crude oil prices rose 8.6%, unprocessed natural gas prices rose 14.5%, and coal prices fell 0.2%, while the price index for unprocessed foodstuffs and feedstuffs rose 3.5% on a 11.3% increase in the price of slaughter chickens, a 6.4% increase in the price of slaughter hogs, and a 4.7% increase in the price of corn...at the same time, the index for core raw materials other than food and energy materials fell 1.3%, as the price index for iron and steel scrap fell 10.3% against minor price changes in other materials... this raw materials index is now 19.0% higher than a year ago, just the fourth annual increase in more than 2 years, as the year over year change on this index had been negative from the beginning of 2019 through October of last year...

Lastly, the price index for services for intermediate demand rose 0.7% in February, after rising 1.3% in January, 0.4% in December, falling a revised 0.2% in November, rising 0.7% in October, rising 1.1% in September, 0.8% in August, 0.5% in July, and 0.3% last  June….the price index for intermediate trade services was 2.0% higher, as margins for metals, minerals, and ores wholesalers rose 12.4%, margins for intermediate hardware, building material, and supplies retailers rose 8.1% and margins for machinery and equipment parts and supplies wholesalers rose 4.7%...meanwhile, the index for transportation and warehousing services for intermediate demand was 1.5% higher, as the intermediate price index for transportation of passengers rose 3.6% and the intermediate price index for arrangement of freight and cargo rose 17.4%...at the same time, the core price index for intermediate services less trade, transportation, and warehousing rose 0.1%, as the intermediate price index for securities brokerage, dealing, investment advice, and related services rose 5.8%, the intermediate price index for investment banking rose 5.5%, and the intermediate price index for network compensation from broadcast TV, cable TV, radio rose 3.8%, while the intermediate price index for traveler accommodation services fell 7.1%..over the 12 months ended in January, the year over year price index for services for intermediate demand is 3.7% higher than it was a year ago, the sixth consecutive positive annual change since it briefly turned negative year over year from April to August for the first time in the history of this index...

Job Openings Rose in January; Hiring, Job Quitting and Layoffs All Fell

The Job Openings and Labor Turnover Survey (JOLTS) report for January from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 165,000, from 6,752,000 in December to 6,917,000 in January, after December job openings were revised 106,000 higher, from 6,646,000 to 6,752,000, incorporating an annual revision of 2020's job openings and labor turnover data, tables for which are included in the release...January's jobs openings were still 3.3% lower than the revised 7,154,000 job openings reported for January a year ago, as the job opening ratio expressed as a percentage of the employed increased to 4.6% from the 4.5% logged in December, and was also up from the 4.5% rate of January a year ago...the state and local government education sector, with a 56,000 job opening increase to 273,000 openings, saw the largest percentage increase, while the professional and business services sector saw job openings decrease by 123,000 to 1,355,000 (details on job openings by industry and region can be viewed in Table 1)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in January, seasonally adjusted new hires totaled 5,301,000, down by 110,000 from the revised 5,411,000 who were hired or rehired in December, as the hiring rate as a percentage of all employed fell from 3.8% in December to 3.7% in January, and was also down from the 3.9% hiring rate in January a year earlier (details of hiring by sector since September are in table 2)....meanwhile, total separations fell by 275,000, from 5,582,000 in December to 5,307,000 in January, as the separations rate as a percentage of the employed fell from 3.9% to 3.7%, which was also down from 3.8% in January a year ago (see table 3)...subtracting the 5,307,000 total separations from the total hires of 5,301,000 would imply a decrease of 6,000 jobs in January, in contrast to the revised payroll job increase of 166,000 for January reported in the February establishment survey of two weeks ago 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 3,311,000 of us voluntarily quit our jobs in January, down from the revised 3,407,000 who quit their jobs in December, while the quits rate, widely watched as an indicator of worker confidence, fell from 2.4% to 2.3% of total employment, while it was the same as the 2.3% quits rate of a year earlier (see details in table 4)....in addition to those who quit, another 1,687,000 were either laid off, fired or otherwise discharged in January, down by 136,000 from the revised 1,823,000 who were discharged in December, as the discharges rate fell from 1.3% to 1.2% of all those who were employed during the month, which was also the same as the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 310,000 in January, down from 352,000 in December, for an 'other separations rate’ of 0.2%, the same as in December and as in January 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...   

January Wholesale Sales Up 1.6%, Wholesale Inventories Down 0.4%

The January report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $531.7 billion, up 4.9 percent (±0.7 percent) from the revised December level and up 5.9 percent (±0.7 percent) from the revised wholesale sales of January 2020....the December preliminary estimate of wholesale sales was revised up from $503.8 billion to $506.844 billion, which meant December's sales were 1.9% above the November level, rather than up 1.2% as was reported a month ago...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods in a warehouse represent goods that were produced but not sold, and this January report estimated that wholesale inventories were valued at $661.7 billion at month end, an increase of 1.3  percent (+/-0.4%) from the revised December level and 0.6 percent (±0.9)* percent higher than January a year ago...the December preliminary inventory estimate was concurrently revised upward from $651.5 billion to $653.3 billion, now up 0.6% from November...

In national accounts data, January's wholesale inventories will be adjusted the producer price index for January to determine their real change..with notable exceptions such as farm products, chemicals and petroleum, we've estimated that wholesale inventories appear to be roughly 70% finished goods...with the January producer price index for finished goods up by 1.3% while the producer price indexes for intermediate goods & raw goods were 1.7% and 3.8% higher respectively, we can thus figure that January’s real wholesale inventories will be down by a few tenths of a percent...since real wholesale inventories increased slightly over the 4th quarter, January's wholesale inventories real decrease will have a modest negative impact on 1st quarter GDP...

 

 

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

Sunday, March 7, 2021

February’s jobs report; January’s trade deficit, construction spending, & factory inventories

In addition to the Employment Situation Summary for February from the Bureau of Labor Statistics, this week's major releases included three reports that will input into 1st quarter GDP: the Commerce Dept report on our International Trade for January, the January report on Construction Spending, and the Full Report on Manufacturers' Shipments, Inventories and Orders for January, both 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, contracted by a seasonally adjusted $1.3 billion, or at a 0.4% annual rate, as non-revolving credit expanded at a 3.2% annual rate to $3,211.7 billion, while revolving credit outstanding contracted at a 12.2% rate to $965.1 billion...

The week’s privately issued reports included the ADP Employment Report for February and the light vehicle sales report for February from Wards Automotive, which estimated that vehicles sold at a 15.67 annual rate in February, down 5.8% from the revised 16.63 million annual sales rate in January, and down 6.9% from the 16.83 million annual sales rate in February a year ago...in addition, this week saw both of the widely followed purchasing manager's survey from the Institute for Supply Management (ISM): the February Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 60.8% in February, up from 58.7% in January, which suggests a broader based growth among manufacturing firms nationally, while the February 2021 Services Report On Business reported their Services Index fell to 55.3%, down from 58.7% in January, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in February... 

Employers Add 379,000 Jobs in February, Unemployment Rate Falls to 6.2%

The Employment Situation Summary for February reported an unexpectedly large payroll job increase, while the employment rate rose 0.1% and the unemployment rate fell 0.1%…estimates extrapolated from the seasonally adjusted establishment survey projected that employers added 379,000 jobs in February, after the previously estimated payroll job increase for January was revised up by 117,000 from 49,000 to 166,000, while the payroll jobs decrease for December was revised down by 79,000, from a loss of 227,000 jobs to a loss of 306,000 jobs…hence, those revisions mean that this report represents a total of 417,000 more seasonally adjusted payroll jobs than the report of a month ago......the unadjusted data shows that there were actually 978,000 more payroll jobs extant in February than in January, as typical seasonal job increases in sectors such as professional & business services, leisure and hospitality and public and private education were leveled by the seasonal adjustments…note that since these surveys were taken during the week including February 12th, they do not include the impacts of the polar vortex, which shut down large swaths of the country's midsection from February 14th to the 20th..

Seasonally adjusted job increases in February were spread through the private goods producing and service sectors, as the only significant job losses were in government and construction, with payroll job decreases of 86,000, and 61,000 in those sectors respectively...with the easing of pandemic-related restrictions in some parts of the country, the leisure and hospitality sector saw an increase of 355,000 jobs, including the addition of 285,900 more jobs in bars and restaurants and 32,500 more jobs in amusements, gambling, and recreation....the broad professional and business services sector added 63,000 jobs, with an increase of 52,700 jobs with temporary help services and 7,200 jobs in legal services....employment in health care and social assistance rose by 45,600, with the addition of 17,500 jobs in individual and family services, 11,600 jobs in nursing homes, and 8,700 jobs in doctor's offices…in addition, seasonally adjusted retail jobs increased by 41,100, with 14,400 of those in general merchandise stores and 11,900 in drug stores, which were partially offset by a loss of 20,000 jobs in clothing and clothing accessories stores...employment in manufacturing rose by 21,000, led by the addition of 9,700 jobs in the manufacture of transportation equipment other than motor vehicles and parts....meanwhile, the government job losses were mostly in education, with the loss of 36,600 jobs in local school districts and 32,000 jobs in state government education, while the construction job losses included 36,200 with nonresidential specialty trade contractors and 20,800 in heavy and civil engineering construction...elsewhere, employment in other major sectors, including resource extraction, wholesale, transportation and warehousing, information,financial and utilities saw job gains or losses of less than 10,000 over the month....

The establishment survey also showed that average hourly pay for all employees rose by 7 cents an hour to $30.03 an hour in February, after it had increased by 6 cents an hour in January; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents an hour to $25.19 an hour...employers also reported that the average workweek for all private payroll employees decreased by three-tenths of an hour to 34.6 hours in February, while hours for production and non-supervisory personnel decreased by 0.4 hour to 34.0 hours...in addition, the manufacturing workweek decreased by 0.2 hour to 40.2 hours, while average factory overtime was down 0.1 hour to 3.1 hours...

Meanwhile, the February household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 208,000 to 150,239,000, while the similarly estimated number of those unemployed fell by 158,000 to 9,972,000; which together meant there was a 50,000 increase in the total labor force...since the working age population had grown by 67,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by a rounded 18,000 to 100,708,000...with the decrease of those in the labor force statistically insignificant compared to the civilian noninstitutional population, the labor force participation rate remained unchanged at 61.4%....however, the increase in number employed as a percentage of the increase in the population was large enough to raise the employment to population ratio, which we could think of as an employment rate, from 57.5% in January to 57.6% in February ...at the same time, the decrease in the number unemployed was large enough reduce the unemployment rate from 6.3% in January to 6.2% in February....on the other hand, the number who reported they were involuntarily working part time rose by 142,000 to 6,088,000 in February, which meant that the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", remained unchanged at 11.1% in February....

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

US Trade Deficit Rose 1.9% in January on Higher Imports of Pharmaceuticals

Our trade deficit rose 1.9% in January, as both the value of our exports and our imports increased, but the value of our imports increased by more...the Commerce Dept report on our international trade in goods and services for January indicated that our seasonally adjusted goods and services trade deficit rose by a rounded $1.2 billion to a rounded $68.2 billion in January, from a December deficit that was revised from $66.6 billion to $67.0 billion....the value of our January exports rose by $1.8 billion to $191.9 billion as a $2.1 billion increase to $135.7 billion in our exports of goods was partly offset by a decrease of $0.3 billion to $56.3 billion in our exports of services, while our imports rose by $3.1 billion to $260.2 billion as a $3.4 billion increase to $221.1 billion in our imports of goods was partly offset by a $0.3 billion decrease to $39.0 billion in our imports of services...export prices averaged 2.5% higher in January, which means the relative real increase in exports for the month was less than the nominal increase by that percentage, while import prices averaged 1.4% higher, meaning the increase in real imports was smaller than the nominal dollar decrease reported here by that percentage......

The increase in our January exports of goods resulted from greater exports of industrial supplies and materials and of capital goods, which was partly offset by lower exports of soybeans, automotive parts, and consumer goods...referencing the Full Release and Tables for January (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $2,505 million to $45,999 million led by a $620 million increase in our exports of petroleum products other than fuel oil, a $355 million increase in our exports of plastic materials, and a $332 million increase in our exports of natural gas liquids, and that our exports of capital goods rose by $1,565 million to $41,570 million on a $527 million increase in our exports of industrial machines other than those itemized separately and a $404 million increase in our exports of civilian aircraft...partially offsetting the increases in those two end use categories, our exports of automotive vehicles, parts and engines fell by $660 million to $12,600 million on a $460 million decrease in our exports of parts and accessories other than engines, chassis, or tires, our exports of consumer goods decreased by $638 million to $16,032 million on a $309 million decrease in our exports of jewelry and a $255 million decrease in our exports of pharmaceuticals, our exports of foods, feeds and beverages fell by $538 million to $13,873 million on a $1123 million decrease in our exports of soybeans which was partly offset by a $417 million increase in our exports of corn, and our exports of other goods not categorized by end use fell by $160 million to $5,206 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our January goods imports and shows that the January increase in our imports was due to higher imports of pharmaceuticals, which in turn were partly offset by lower import of passenger cars...our imports of consumer goods increased by $3,739 million to $63,339 million as a $4,964 million increase in our imports of pharmaceutical preparations was partly offset by a $450 million decrease in our imports of of artwork, antiques and other collectibles, a $406 million decrease in our imports of apparel and textiles other than those of wool or cotton, and  a $400 million decrease in our imports of toys, games, and sporting goods, while our imports of industrial supplies and materials rose by $691 million to $43,054 million as a $1,178 increase in our imports of crude oil and a $382 million increase in our imports of fuel oil were offset by a $775 million decrease in our imports of finished metal shapes…in addition, our imports of capital goods rose by $650 million to $59,549 million on a $341 million increase in our imports computers, and our imports of foods, feeds, and beverages rose by $832 million to $13,785 million on increases in our imports of most foods and feeds listed....partially offsetting the increases in those end use categories, our imports of automotive vehicles, parts and engines fell by $1561 million to $31,576 million on a $1,879 million decrease in our imports of passenger cars, and our imports of other goods not categorized by end use fell by $920 million to $8,554 million...

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

The January figures show surpluses, in billions of dollars, with South and Central America ($5.3), Hong Kong ($2.4), Brazil ($1.5), Saudi Arabia ($0.5), and United Kingdom ($0.5). Deficits were recorded, in billions of dollars, with China ($27.2), European Union ($20.1), Mexico ($11.9), Germany ($7.2), Japan ($5.2), Italy ($2.9), France ($2.3), India ($2.3), Taiwan ($2.1), Canada ($2.0), South Korea ($0.9), and Singapore ($0.1).

  • The deficit with Mexico increased $1.6 billion to $11.9 billion in January. Exports increased $0.1 billion to $20.7 billion and imports increased $1.6 billion to $32.6 billion.
  • The deficit with Germany increased $1.5 billion to $7.2 billion in January. Exports decreased $0.2 billion to $4.7 billion and imports increased $1.3 billion to $12.0 billion.
  • The deficit with South Korea decreased $1.8 billion to $0.9 billion in January. Exports increased $1.3 billion to $5.7 billion and imports decreased $0.5 billion to $6.6 billion.

To gauge the impact of January trade on 1st quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2012 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that the amounts are not annualized here...from that table, we can figure that the 4th quarter’s real exports of goods averaged 145,373.7 million monthly in chained 2012 dollars, while inflation adjusted January goods exports were at 147,085 million in that same 2012 dollar quantity index representation... computing the annualized change between those two figures, we find that January's real exports of goods are thus rising at a 4.79% annual rate from those of the 4th quarter, or at a pace that would add about 0.29 percentage points to 1st quarter GDP growth if continued through February and March...in a similar manner, we find that our 4th quarter real imports of goods averaged 239,602.7 million monthly in chained 2012 dollars, while inflation adjusted goods imports in January were at 243,571 million...that would indicate that so far in the 1st quarter, we have seen our real imports of goods increase at a 6.79% annual rate from those of the 4th quarter...since an increase in imports would subtract from GDP because it would represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, that increase at a 6.79% rate would subtract roughly 0.68 percentage points to 1st quarter GDP....hence, if our January trade in goods deficit is maintained at the same level throughout the 1st quarter, the deterioration in our balance of trade in goods would subtract about 0.39 percentage points from the growth of our 1st quarter GDP....while we have not computed the impact of the change in international trade in services here, we'd note that both exports and imports of services fell by $0.3 billion in January, so the impact of the month's services trade on GDP should be minimal...

Also note that both exports and imports were revised from July through December to incorporate more comprehensive and updated quarterly and monthly data; in addition, seasonally adjusted data for all months in 2020 were revised so that the totals of the seasonally adjusted months equaled the annual totals...the obvious impact of these revisions will be to necessitate the revision of GDP figures for each quarter of 2020;  however, for quarters other than the 4th, which still has another estimate due out at the end of the month, those GDP revisions will not take place until the annual GDP revisions, which are typically released near the end of July...

Construction Spending Up 1.7% in January after December and November Figures Were Revised Higher 

The Census Bureau's report on January construction spending (pdf) estimated that January's seasonally adjusted construction spending would work out to $1,521.5 billion annually if extrapolated over an entire year, which was 1.7 percent (±0.7 percent) above the revised annualized estimate of $1,496.5 billion for construction spending in December, and 5.8 percent (±1.0 percent) above the estimated annualized level of construction spending of January last year...the December spending estimate was revised from the $1,490.4 billion published a month ago to $1,496.5 billion, while November's annualized construction spending was revised from $1,475.6 billion to $1,479.555 billion...since those figures are already annualized, the combined upward revisions of $10.1 billion to November and December construction spending figures would be averaged over the 3 months of the 4th quarter and therefore raise the quarter's annualized construction spending by almost $3.4 billion, and would thus imply an upward revision of about 0.09 percentage points to fourth quarter GDP when the third estimate is released at the end of March, assuming there are no major changes to or imbalances in the previously applied inflation adjustments...

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

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,160.0 billion, 1.7 percent (±0.5 percent) above the revised December estimate of $1,140.9 billion. Residential construction was at a seasonally adjusted annual rate of $713.0 billion in January, 2.5 percent (±1.3 percent) above the revised December estimate of $695.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $447.0 billion in January, 0.4 percent (±0.5 percent)* above the revised December estimate of $445.2 billion.
  • Public Construction: In January, the estimated seasonally adjusted annual rate of public construction spending was $361.5 billion, 1.7 percent (±1.2 percent) above the revised December estimate of $355.5 billion. Educational construction was at a seasonally adjusted annual rate of $89.9 billion, 0.1 percent (±1.3 percent)* below the revised December estimate of $90.0 billion. Highway construction was at a seasonally adjusted annual rate of $107.8 billion, 5.8 percent (±3.1 percent) above the revised December estimate of $101.9 billion.

As you can tell from that summary, construction spending would input into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of January’s construction spending reported in this release on 1st quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price...moreover, there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for all of those types of construction separately, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment and come up with an estimate... that index showed that aggregate construction costs were up 0.2% in January, after they had risen by 0.1% in both December and in November...

On that basis, we can thus estimate that January construction costs were roughly 0.3% more than those of November, and about 0.4% more than October, and of course, 0.2% more than December...we’ll then use those percentages to inflate the lower priced spending figures for each of the 4th quarter months and compare them to January, which is arithmetically the same as deflating January construction spending, for purposes of comparison.…this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,496,450 in December, $1,479,555 in November, and $1,458,989 in October...thus to compare January's annualized construction spending of $1,521,454 million to inflation adjusted figures of the fourth quarter, our calculation is:   (1,521,454 / ((( 1,496,450 * 1.002) + (1,479,555 * 1.003) + (1,458,989 *1.004)) / 3) = 1.0261001, hence indicating that adjusted for inflation, construction spending in January was up 2.61% vis a vis that of the 4th quarter, or up at a 10.86% annual rate...then, to figure the potential effect of that change on GDP, we take the difference between the 4th quarter inflation adjusted average and January's inflation adjusted spending as a fraction of inflation adjusted 4th quarter GDP, and find that January construction spending is rising at a rate that would add about 0.95 percentage points to 1st quarter GDP, if in the unlikely event that there is no further change in real construction over the next two months.. 

January Factory Shipments Rose 1.9%, Factory Inventories were 0.1% Higher

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for January from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by a rounded $13.1 billion or 2.6 percent to $509.4 billion in January, following an increase of 1.6% to $496.3 billion in December, which was revised from the increase of 1.1% to $493.5 billion that was reported for December a month ago....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful for their revised updates to the January 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 January, up nine consecutive months, increased $13.1 billion or 2.6 percent to $509.4 billion, the U.S. Census Bureau reported today. This followed a 1.6 percent December increase. Shipments, also up nine consecutive months, increased $9.6 billion or 1.9 percent to $513.3 billion. This followed a 2.1 percent December increase. Unfilled orders, up following seven consecutive monthly decreases, increased $1.2 billion or 0.1 percent to $1,072.8 billion. This followed a 0.2 percent December decrease. The unfilled orders-to-shipments ratio was 6.10, down from 6.25 in December. Inventories, up five of the last six months, increased $0.6 billion or 0.1 percent to $696.3 billion. This followed a 0.3 percent December increase. The inventories-to-shipments ratio was 1.36, down from 1.38 in December.
  • New Orders for manufactured durable goods in January, up nine consecutive months, increased $8.4 billion or 3.4 percent to $256.7 billion, unchanged from the previously published increase. This followed a 1.2 percent December increase. Transportation equipment, up eight of the last nine months, led the increase, $6.1 billion or 7.7 percent to $85.1 billion. New orders for manufactured nondurable goods increased $4.7 billion or 1.9 percent to $252.7 billion.
  • Shipments of manufactured durable goods in January, up eight of the last nine months, increased $4.9 billion or 1.9 percent to $260.6 billion, down from the previously published 2.0 percent increase. This followed a 2.1 percent December increase. Machinery, also up eight of the last nine months, led the increase, $1.0 billion or 3.0 percent to $33.0 billion. Shipments of manufactured nondurable goods, up nine consecutive months, increased $4.7 billion or 1.9 percent to $252.7 billion. This followed a 2.0 percent December increase. Petroleum and coal products, up eight of the last nine months, led the increase, $3.3 billion or 7.3 percent to $48.0 billion.
  • Unfilled orders for manufactured durable goods in January, up following seven consecutive monthly decreases, increased $1.2 billion or 0.1 percent to $1,072.8 billion, unchanged from the previously published increase. This followed a 0.2 percent December decrease. Fabricated metal products, up nine consecutive months, led the increase, $0.9 billion or 1.2 percent to $78.6 billion. 
  • Inventories of manufactured durable goods in January, down two consecutive months, decreased $1.4 billion or 0.3 percent to $424.3 billion, unchanged from the previously published decrease. This followed a 0.2 percent December decrease. Transportation equipment, also down two consecutive months, drove the decrease, $2.3 billion or 1.5 percent to $145.7 billion. Inventories of manufactured nondurable goods, up five of the last six months, increased $2.0 billion or 0.7 percent to $272.0 billion. This followed a 1.1 percent December increase. Petroleum and coal products, up three consecutive months, drove the increase, $2.0 billion or 6.1 percent to $35.3 billion. By stage of fabrication, January materials and supplies increased 0.1 percent in durable goods and 1.4 percent in nondurable goods. Work in process decreased 2.0 percent in durable goods and 0.1 percent in nondurable goods. Finished goods increased 1.5 percent in durable goods and 0.6 percent in nondurable goods.

To gauge the effect of January's nominal factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories increased 1.0% to $249,969 million; the value of work in process inventories was down 1.6% at $205,670 million, while materials and supplies inventories were valued 0.6% higher at $240,628 million...meanwhile, the producer price index for January indicated that prices for finished goods increased 1.3%, that prices for intermediate processed goods were 1.7% higher, and that prices for unprocessed goods were on average 3.8% higher....assuming similar valuations for like inventories, that would suggest that January's real finished goods inventories were about 0.3% less than December's, that real inventories of intermediate processed goods were about 3.3% smaller, and that real raw material inventory inventories were around 3.1% smaller…since there was a small increase in 4th quarter real factory inventories, the large January decrease in real factory inventories will have a significant negative impact on 1st quarter GDP...

 

 

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