Sunday, February 18, 2018

January’s retail sales, consumer and producer prices, industrial production, business inventories, & housing starts

this week saw the release of seven of the regular monthly agency reports, namely the Retail Sales report for January and Business Sales and Inventories for December from the Census Bureau, the January Consumer Price Indexthe January Producer Price Index and the January Import-Export Price Index from the Bureau of Labor Statistics, the January report on Industrial Production and Capacity Utilization from the Fed, and the January report on New Residential Construction, also from the Census Bureau...this week also saw the release of the first two regional Fed manufacturing surveys for February: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell to +13.1, down from +17.7 in January, suggesting decelerating growth in First District manufacturing....meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions rose to +25.8 in February from a  reading +22.2 in January, indicating an larger plurality of that region's manufacturing firms reported increases in their activity this month..

January Consumer Prices Rise 0.5% on Higher Fuel, Clothing, and Medical Services

the consumer price index increased by 0.5% in January, led by higher prices for fuels, clothing and medical services….the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers rose 0.5% in January after it had risen 0.1% in December, 0.4% in November, 0.1% in October, 0.5% in September, 0.4% in August, and 0.1% in July....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 246.524 in December to 247.867 in January, which left it statistically 2.071% higher than the 241.432 index reading of last January, which is reported as a 2.1% year over year increase...with a large increase in energy prices a major reason for this month's CPI increase, seasonally adjusted core prices, which exclude food and energy, rose by 0.3% for the month, with the unadjusted core index rising from 253.558 to 254.638, which put it 1.821% ahead of its year ago reading of 250.083, which is rounded to a 1.8% increase...

the volatile seasonally adjusted energy price index rose by 3.0% in January, after it had fallen by 0.2% in December, but after it had risen by 3.2% in November and by 2.0% in October, and is now 5.5% higher than in January a year ago....prices for energy commodities were 5.8% higher for the month, while the index for energy services fell by 0.8%, after rising by 0.4% in December....the increase in the energy commodity index was led by a 5.7% increase in the retail price of gasoline, the largest component, while the price of fuel oil rose 9.5%, and while prices for other fuels, including propane, kerosene and firewood, rose by an average of 2.2%…as a result, energy commodities are now priced 9.0% above their year ago levels, with gasoline prices averaging 8.5% higher than they were a year ago…within energy services, the index for utility gas service fell by 2.6% after rising 1.0% in December and 0.7% in November, leaving utility gas priced just 0.2% higher than it was a year ago, while the electricity price index fell by 0.2%, after rising 0.2% in December and 0.5% in November...the energy services price index is now 1.9% higher than last January, as electricity prices have increased by 2.4% over that period...

the seasonally adjusted food price index rose 0.2% in January, after rising 0.2% in December, being unchanged in October and November, rising 0.1% in September, 0.1% in August, 0.2% in July, being unchanged in June, rising 0.2% in May, 0.2% in April, 0.3% in March, 0.2% in February, and 0.1% last January, as the index for food purchased for use at home was 0.1% higher in January, while prices for food bought to eat away from home were 0.4% higher, as prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.2%, while other food prices away from home rose 0.8%...

in the food at home categories, the price index for cereals and bakery products increased by 0.3%, even as prices for bread fell 0.5%, as prices for cakes and cookies rose 1.6%, and prices for rice rose 1.9%...the price index for the meats, poultry, fish, and eggs group was down 0.2% as poultry prices fell 1.3% and beef and veal prices fell 1.2%, while at the same time the index for dairy products was unchanged despite a 1.2% decrease in the price of fresh whole milk...the fruits and vegetables index was 0.5% higher on a 1.9% increase in prices for fresh fruits and a 2.1% increase in prices for canned vegetables....meanwhile, the beverages index was unchanged as roast coffee prices fell 2.6% while noncarbonated juices and drink prices rose 1.0%....lastly, prices in the ‘other foods at home’ category was also unchanged, as peanut butter prices rose 1.6% while frozen and freeze dried prepared food prices were 1.5% lower....among food at home line items, only tomatoes, which have risen 16.5% since last January, have seen a price change greater than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.3% in January after rising by 0.3% in December, 0.1% in November, 0.2% in October, 0.1% in September, 0.2% in August and by 0.1% in each of the prior 4 months, the composite of all goods less food and energy goods rose by 0.4%, while the more heavily weighted composite for all services less energy services was 0.3% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust January retail sales for inflation in national accounts data, the index for household furnishings and supplies was 0.2% higher on a 4.1% increase in the index for window and floor coverings and a 3.4% increase in prices for laundry equipment...the apparel price index was 1.7% higher on a 4.8% increase in prices for women's suits and separates, a 4.5% increase in prices for boy's apparel, and a 4.2% increase in prices for men's shirts and sweaters....at the same time, prices for transportation commodities other than fuel were up 0.2%, as prices for used cars and trucks were up 0.4% and prices for tires rose 0.6%...on the other hand, prices for medical care commodities were 0.1% lower on a 0.2% decrease in prescription drug prices, while the recreational commodities index was 0.3% lower on another 3.8% drop in TV prices and a 1.8% decrease in the index for toys....meanwhile, the education and communication commodities index was 0.8% higher, on a 2.5% increase in the index for telephone hardware, calculators, and other consumer information items and a 2.9% increase in prices for computer software and accessories...lastly, a separate price index for alcoholic beverages was unchanged, while the price index for ‘other goods’ was up 0.5% on a 1.4% increase in the index for miscellaneous personal goods..

within core services, which rose by 0.3%, the price index for shelter rose 0.2% on a 0.3% increase in rents and a 0.3% increase in homeowner's equivalent rent, while costs for lodging away from home at hotels and motels fell 2.5%, the sub-index for water, sewers and trash collection rose 0.2%, and other household operation costs were on average 1.5% higher....at the same time, the index for medical care services was up 0.6%, as prices for eyeglasses and eye care rose 0.9% and hospital services were priced 1.2% higher...meanwhile, the transportation services index was 0.8% higher on a 1.3% increase in car and truck leasing, 1.3% higher prices for motor vehicle insurance, and 1.5% higher parking....the recreation services index rose 0.1% as video discs and other media services rose 5.4% while film processing fell 4.1%, while the index for education and communication services was unchanged as delivery services rose 1.5% while tuition and fees at technical and business schools fell 0.3%...lastly, the index for other personal services was up 0.4% as the index for legal services rose 1.1% and tax return preparation and other accounting fees rose 0.8%...among core line items, the index for toys, which has now fallen 10.0% over the past year, the index for clocks, lamps, and decorator items, which has fallen 10.8%, prices for infants furniture, which are down 11.9%, prices for televisions, which are now 10.7% cheaper than a year ago, the index for audio equipment, which is now 15.1% lower than last January, and prices for wireless phone services, which are still 10.2% lower than a year ago, have all seen prices drop by more than 10% over the past year, while nothing has seen prices rise by a double digit magnitude over that span...

Retail Sales Down 0.3% in January after November and December Revised Lower

seasonally adjusted retail sales decreased 0.3% in January after retail sales for November and December were revised lower...the Advance Retail Sales Report for January (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $492.0 billion during the month, which was down 0.3 percent (±0.5%) from December's revised sales of $493.3 billion but 3.6 percent (±0.7%) above the adjusted sales in January of last year...December's seasonally adjusted sales were revised down from $495.4 billion to $493.3 billion, while November's sales were also revised lower, from $493.6 billion to $493,168 million; as a result, the November to December change was revised up from up 0.4 percent (±0.5%)* to virtually unchanged (±0.3 percent)*.....the revisions to November and December sales would indicate that 4th quarter personal consumption expenditures were lower at a rate greater than a $10.1 billion annually, which would thereby reduce 4th quarter GDP by at least 0.23 percentage points....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 20.9%, from $541,774 million in December to $444,632 million in January, while they were up 5.1% from the $423,111 million of sales in January a year ago, so we can see how a large seasonal adjustment to holiday and post holiday sales brought the headline sales into line, compared to the big sales decrease that would normally be expected in January...

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the January Census Marts pdf....the first pair of columns below gives us the seasonally adjusted percentage change in sales for each kind of business from the December revised figure to this month's January "advance" report in the first sub-column, and then the year over year percentage sales change since last January in the 2nd column...the second double column pair below gives us the revision of the December advance estimates (now called "preliminary") as of this report, with the new November to December percentage change under "Nov 2017 r" (revised) and the December 2016 to December 2017 percentage change as revised in the last column shown...for your reference, the table of last month’s advance estimate of December sales, before this month's revisions, is here.…. 

February 2017 retail sales table

even with nominal sales down 0.3% for the month, this January report is worse than it looks, because prices for most items were higher...as we saw when we reviewed the CPI report, the composite price index for all goods except food and energy was 0.4% higher, which means real gross sales of such core goods averaged 0.7% lower for the month; particularly had hit were clothing stores, which saw sales decrease 0.5% despite the 1.7% increase in prices for apparel...outside of core goods, we'd note that gas station sales were down 0.6% despite a 5.7% increase in the retail price of gasoline, suggesting a large drop in real sales of gasoline...similarly, we see that sales at restaurants and bars were down 0.1% despite a 0.4% increase in prices for food away from home, implying a 0.5% drop in real sales at bars and restaurants...even groceries stores would have seen a decrease in real sales, as nominal sales were unchanged with 0.1% higher prices...

Industrial Production Slips 0.1% in January on 'Mining' Slowdown

the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.1% in January after rising by a revised 0.4% in December, which left it 3.7% higher than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 107.2 in January from 107.3 in December, after the December index was revised from 107.5 to 107.3 and the November index was revised from the 106.5 reported last month to 106.9....as a result, industrial production grew 0.3% in November, rather than falling 0.1%, while industrial production grew 0.4% in December rather than the 0.9% growth that was previously reported...

the manufacturing index, which accounts for more than 77% of the total IP index, rose from 104.7 to 104.8 in January but was reported unchanged, after the December index was revised from 105.0 to 104.7, the November index was revised from 104.9 to 104.8, and the September index was revised from 103.1 to  103.2, while the October index remained at 104.6....meanwhile, the mining index, which includes oil and gas well drilling, fell from 113.5 in December to 112.4 in January after the December index was revised down from 113.6, which still left the mining index 8.8% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 0.6% in January, from 108.5 to 109.2, after the December utility index was revised from 108.1 to 108.5...with January 2018’s heating requirements somewhat above those of January 2017, the utility index is now 10.8% 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 77.5% in January from 77.7% in December, which was revised from the 77.9% that was reported last month ...capacity utilization of NAICS durable goods production facilities was unchanged at 76.1% in January, while capacity utilization for non-durables producers rose from an downwardly revised 77.5% to 77.4%...capacity utilization for the mining sector fell to 84.2% in January from 85.6% in December, which was originally reported as 86.5%, while utilities were operating at 81.1% of capacity during January, up from their 80.8% of capacity during December, which was previously reported at 80.4%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....

Producer Prices Up 0.4% in January on Higher Priced Energy

with the release of the Producer Price Index for January 2018 from the BLS, price changes over 2017 were recalculated to reflect seasonal adjustment factors that changed over the year; hence all prior months that we'll refer to in reviewing this release have been revised to reflect those changes....for January, the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.4%, as prices for finished wholesale goods increased by 0.7%, while margins of final services providers increased by 0.3%...this followed a revised December report that indicated the overall PPI was on average unchanged, as prices for finished goods rose by 0.1%, while margins of final services providers decreased by 0.1%, and a revised November report that showed the overall PPI had increased by 0.4%, as prices for finished goods had increased 0.9%, while margins of final services providers increased by 0.2%....excluding food, energy and trade services, core producer prices were also up 0.4% in January, after rising 0.1% in December, 0.3% in both November and October and 0.2% in September...on an unadjusted basis, producer prices are now 2.7% higher than a year earlier, with the core producer price index 2.5% higher for the year, up from the year over year figures of 2.6% for the PPI and 2.3% for core indicated last month..

as noted, the price index for final demand for goods, aka 'finished goods', was up 0.4% in January, after being unchanged in December, rising 0.9% in November, 0.2% in October, 0.6% in September and 0.5% in August...the price index for wholesale energy was up 3.4% in January after rising 0.5% in December and 3.6% in November, while the price index for wholesale foods fell 0.2% and the index for final demand for core wholesale goods (ex food and energy) was 0.2% higher...driving the wholesale energy price index increase was a 7.7% increase in the wholesale price of gasoline and 5.5% higher wholesale prices for heating oil, while wholesale residential natural gas prices fell 2.7%...for wholesale foods, higher prices for vegetables and grain were more than offset by a 36.7% drop in wholesale prices for fresh eggs....among wholesale core goods, prices for construction machinery and equipment fell 2.1% while the wholesale price index for household appliances was up 2.0%…

at the same time, the index for final demand for services rose 0.3% in January, after falling 0.1% in December, rising 0.2% in November, 0.5% in October, and by 0.2% in both August and September, as the January index for final demand for trade services rose 0.3%, the index for final demand for transportation and warehousing services rose 0.4%, while the index for final demand for services less trade, transportation, and warehousing services was also 0.4% higher....among trade services, seasonally adjusted margins for TV, video, and photographic equipment retailers increased 10.3% while margins for chemicals and chemical products wholesalers fell 2.3%... among transportation and warehousing services, margins for airline passenger services were 1.6% lower and margins for truck transportation of freight rose 1.4%...in the core final demand for services index, the index for hospital inpatient care rose 1.0% while the index for cell phone and wireless telecommunication services fell 2.6%..

this report also showed the price index for intermediate processed goods was 0.7% higher, after rising 0.5% in December, 0.5% in November, 0.7% in October, and 0.6% in September....the price index for intermediate energy goods rose 2.5% as refinery prices for jet fuel rose 8.1% and prices for unblended gasoline rose 7.1%, while prices for intermediate processed foods and feeds fell 0.3% as the processed eggs index fell 13.2%...meanwhile, the core price index for processed goods for intermediate demand less food and energy was 0.3% higher on a 4.4% increase in the index for primary nonferrous metals and a 5.4% increase in prices for copper and brass mill shapes....prices for intermediate processed goods are now 4.6% higher than in January a year ago, now the fifteenth consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

meanwhile, the price index for intermediate unprocessed goods rose 0.9% in January, after rising 1.9% in December, 3.0% in November, but after falling 0.3% October....the price index for crude energy goods rose 0.5% as raw natural gas prices fell 13.1% while crude oil prices rose 11.6%, while the index for unprocessed foodstuffs and feedstuffs fell 0.8%, as prices for slaughter cattle fell 4.5% and prices for raw milk fell 6.3%...at the same time, the index for core raw materials other than food and energy materials rose 3.8%, as prices for iron and steel scrap rose 12.9% and prices for copper base scrap rose 3.8%...this raw materials index is now up by just 2.5% from a year ago, in contrast to the year over year increase of 10.6% that we saw in November...

lastly, the price index for services for intermediate demand rose 0.1% in January after being unchanged in December, rising 0.5% in November, 0.3% in October, and 0.2% in September...the index for trade services for intermediate demand was down 0.3%, as margins for chemicals and allied products wholesalers fell 2.3% while margins for intermediate wholesalers of paper and plastics products rose 2.4%…the index for transportation and warehousing services for intermediate demand rose, as the intermediate index for long-distance truck transportation of freight rose 1.4%...at the same time, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.1% higher, as the index for securities brokerage, dealing, investment advice rose 1.6% while the index for internet advertising sold by non-print publishers fell 6.3%....over the 12 months ended in December, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 2.9% higher than it was a year ago...

December Business Sales Up 0.6%, Business Inventories Up 0.4%

after the release of the January retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for December (pdf), which incorporates the revised December retail data from that December report and the earlier published December wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,431.3 billion in December, up 0.6 percent (±0.3%) from November's revised sales, and up 6.7  percent (±0.4%) from December sales of a year earlier...note that total November sales were concurrently revised up from the originally reported $1,420.1 billion to $1,422.763 billion, now up 1.4% from October....manufacturer's sales rose 0.6% to $495,401 million in December; retail trade sales, which exclude restaurant & bar sales from the revised December retail sales reported earlier, fell 0.1% to $435,673 million, and wholesale sales rose 1.2% to $500,220 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,902.2 billion at the end of December, up 0.4 percent (±0.1%) from November, and 3.2 percent (±0.3 percent) higher than in December a year earlier...at the same time, the value of end of November inventories was revised from the $1,895.4 reported last month to $1,895.1 billion....seasonally adjusted inventories of manufacturers were estimated to be valued at $669,232 million, up 0.5% from November, while inventories of retailers were valued at $620,850 million, 0.2% more than in November, and inventories of wholesalers were estimated to be valued at $612,122 million at the end of December, 0.4% higher than in November...

January Housing Starts and Building Permits Both Reported Higher

the January report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in January was at a seasonally adjusted annual rate of 1,326,000, which was 9.7 percent (±16.8 percent)* above the revised estimated December annual rate of 1,209,000, and was 7.3 percent (±15.0 percent)* above last January's rate of 1,236,000 housing starts annually...however, the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month or even over the past year, with the figures in parenthesis the most likely range of the change indicated; in other words, January housing starts could have been down by 7.1% or up by as much as 26.5% from those of December, with revisions of a greater magnitude in either direction possible...in this report, the annual rate for December housing starts was revised from the 1,192,000 reported last month to 1,209,000, while November starts, which were first reported at a 1,297,000 annual rate, were unrevised from last month's initial revised figure of 1,299,000 annually....these annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 90,100 housing units were started in January, up from the 81,300 units that were started in December, but down from the 97,900 units that were started in November...

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in January, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,396,000, which was 7.4 percent (±1.2 percent) above the revised December rate of 1,300,000 permits, and also 7.4 percent (±1.9 percent) above the 1,300,000 a year rate of building permit issuance in January a year earlier...the annual rate for housing permits issued in December was revised down from the originally reported 1,302,000....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 98,100 housing units were issued in January, up from the revised estimate of 93,100 new permits issued in December.... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.326 Million Annual Rate in January and Comments on January Housing Starts...

 

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

Sunday, February 11, 2018

December’s trade deficit, wholesales sales and inventories, and job openings

the key economic release of the past week was the December report on our International Trade from the Census Bureau...the Census also released the Wholesale Trade, Sales and Inventories report for December on Friday this week, while the Bureau of Labor Statistics released the Job Openings and Labor Turnover Survey (JOLTS) for December...in addition, the Fed released the Consumer Credit Report for December, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $18.4 billion, or at a 5.8% annual rate, as non-revolving credit expanded at a 5.7% rate to $2,813.1 billion and revolving credit outstanding rose at a 6.0% rate to $1,027.9 billion...this week's major private report was the Mortgage Monitor for December (pdf) from Black Knight Financial Services, which indicated that 4.71% of US mortgages were delinquent in December, up from 4.55% in November and up from 4.42% in December a year ago, and that 0.65% of all mortgages were in the foreclosure process at the end of the month, down from 0.66% of mortgages in November and down from the 0.95% of mortgages that were in foreclosure in December a year ago...

December Trade Deficit Up 5.3% on Higher Imports of Cellphones, Drugs and Cars

our trade deficit was 5.3% higher in December as the value of both our exports and our imports increased, but our imports increased by more....the Census report on our international trade in goods and services for December indicated that our seasonally adjusted goods and services trade deficit rose by $2.7 billion to $53.1 billion in December from a revised November deficit of $50.4 billion...the value of our December exports rose by $3.5 billion to $203.4 billion on a $3.4 billion increase to $137.5 billion in our exports of goods and a $0.1 billion increase to $65.9 billion in our exports of services, while the value of our imports rose $6.2 billion to $256.5 billion on a $6.0 billion increase to $210.8 billion in our imports of goods, and a $0.3 billion increase to $45.7 billion in our imports of services...the November trade deficit was revised from the originally reported $50.5 billion to $50.4 billion, while trade figures for every prior month of 2017 were also revised, meaning that previously published quarter over quarter figures for GDP will have to be revised as well...export prices were on average 0.1% lower in December, so our real December exports would be more  than the nominal value by that percentage, while import prices were 0.1% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage....

the $3.4 billion increase in our December exports of goods came by way of greater exports of industrial supplies and materials, capital goods, and foods, feeds and beverages...referencing the Full Release and Tables for December (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $1,545 million to $42,812 million on a $214 million increase in our exports of organic chemicals and greater exports of energy goods including fuel oil, coal and natural gas liquids, while our exports of capital goods rose by $1,164 million to $47,443 million on a $784 million increase in our exports of civilian aircraft and a $676 million increase in our exports of industrial machines other than those itemized separately....in addition, our exports of foods, feeds and beverages rose by $448 million to $10,847 million on smaller increases in a large number of items, and our exports of other goods not categorized by end use rose by $517 million to $5,749 million....slightly offsetting the increases in those export categories, our exports of consumer goods fell by $208 million to $16,738 million on a $299 million decrease in our exports of art, antiques and other collectibles, and our exports of automotive vehicles, parts, and engines fell by $75 million to $13,416 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows our imports of all major end use categories increased in December, led by greater imports of consumer goods and passenger cars...our imports of consumer goods rose by $3,212 million to $55,495 million on a $1,717 million increase in our imports of cellphones and a $1,820 million increase in our imports of pharmaceutical preparations, while our imports of automotive vehicles, parts and engines rose by $1,055 million to $30,916 million on a $1,149 million increase in our imports of new and used passenger cars...in addition, our imports of industrial supplies and materials rose by $567 million to $45,308 million as our imports of organic chemicals rose by $567 million and our imports of natural gas rose by $226 million, our imports of capital goods rose by $837 million to $57,247 million on a $359 million increase in our imports of civilian aircraft and a $383 million increase in our exports of industrial machines other than those itemized separately, and our imports of foods, feeds, and beverages rose by $249 million to $11,892 million...only slightly offsetting those import increases, our imports of other goods not categorized by end use fell by $65 million to $8405 million....

the press release gives us details on our balance of trade with selected countries: The December figures show surpluses, in billions of dollars, with South and Central America ($3.7), Hong Kong ($2.5), Brazil ($1.1), Singapore ($0.9), and United Kingdom ($0.3). Deficits were recorded, in billions of dollars, with China ($34.0), European Union ($17.2), Mexico ($6.1), Germany ($5.7), Japan ($5.5), Italy ($3.7), South Korea ($2.1), India ($2.1), France ($2.1), Taiwan ($1.6), Canada ($1.4), Saudi Arabia ($0.6), and OPEC ($0.5).

  • The deficit with the European Union increased $3.8 billion to $17.2 billion in December.  Exports increased $1.2 billion to $25.1 billion and imports increased $4.9 billion to $42.3 billion.
  • The deficit with China increased $0.6 billion to $34.0 billion in December. Exports increased $1.1 billion to $11.9 billion and imports increased $1.7 billion to $45.9 billion.

in the advance report on 4th quarter GDP of two weeks ago, our December trade deficit was estimated based on the sketchy Advance Report on our International Trade in Goods which was released just before the GDP release...that report estimated that our seasonally adjusted December goods trade deficit was at $71.6 million on a Census basis, on goods exports of $137.64 billion and goods imports of $209.22 billion...this report revises that and shows that our actual Census basis goods trade deficit in December was at $72.26 billion on adjusted goods imports of $209.26 billion and adjusted goods exports of $137.0 billion...at the same time, the November goods trade deficit was revised down from that advance report by nearly $0.2 billion to $69.8 billion, and the October goods trade deficit was revised down by about $0.05 billion to $68.2 billion…those revisions from the previously published figures would suggest that the 4th quarter trade deficit in goods was roughly $0.51 billion more than was accounted for in last week's GDP report, or roughly $2.1 billion on an annualized basis, which would subtract about 0.04 percentage points from 4th quarter GDP when the 2nd estimate is released at the end of this month....

however, trade in goods for July, August, September and October, which all go into figuring the change in 4th quarter GDP, were also revised with this report as well, and since our GDP growth is a measure of the change from one quarter to the next, we'd have to adjust for changes in those months as well to get an accurate 4th quarter read...since that data was not revised or included in the advance report on trade in goods, to assess the changes to those months we need to compare the previously published trade details in the pdf for November's trade report to the revised numbers in the pdf for December's trade report....without going into too much detail or adjusting for fractional inflation factors, the total trade deficit for July was revised from $45,162 million to $45,102 million, the net trade deficit for August was revised from $44,306 million to $44,245 million, and the net trade deficit for September was revised from $44,890 million to $44,830 million...that means the trade deficit in the 3rd quarter was roughly $1.8 billion less than the figure used by the 4th GDP report, or short at a annual rate of roughly $5.4 billion, and hence the change in the trade deficit from the 3rd quarter to the 4th quarter was that much greater...those 3rd quarter revisions would thus subtract another 0.11 percentage points from the growth of 4th quarter GDP, but the relevant changes to the 3rd quarter data, which also affect 4th quarter growth, will not be applied until the annual revision to GDP is released this summer....

December Wholesale Sales Up 1.2%, Wholesale Inventories Up 0.4%

the December report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $500.2 billion, up by 1.2 percent (±0.7 percent) from the revised November level of $494.2 billion, and 9.1 percent (±1.1 percent) above the value of wholesale sales of a year earlier...the November preliminary sales estimate was revised up by $1.8 billion from $492.4 billion, which now means November sales were 1.9 percent (±0.7 percent) more than those of October, rather than 1.5% as reported last month....wholesale sales of durable goods were up 1.0 percent (+/-0.7%) from last month and were up 10.0% from a year earlier, while wholesale sales of nondurable goods were up by 1.5 percent (+/-0.8%) from November, and were up 8.3 percent from last December, with wholesale sales of petroleum and petroleum products up 23.2%, likely on higher prices...as an intermediate activity, wholesale sales are not included in GDP except as a trade service, since they do not represent an increase in the output of the goods sold....

on the other hand, the monthly change in private wholesale inventories is a major factor in GDP, as additional goods in a warehouse or “on the shelf” represent more goods that had been produced, and the Census estimated they were valued at $612.1 billion at the end of December, 0.4 percent (±0.4 percent)* higher than the revised November level and 3.4 percent (±0.7 percent) above the valuation of last December's inventories...November's preliminary inventory estimate was revised from last month's estimate of $617.7 billion to $609.7 billion, and hence the November change in wholesale inventories was an increase of 0.4%, rather than 0.8% as reported last month.....wholesale durable goods inventories were up 0.4 percent (+/-0.4%) from November and were 4.7% higher than a year earlier, while inventories of nondurable goods were valued 0.4 percent (+/-0.7%) higher than in November and were valued 1.4% higher than last November...

in the advance report on 4th quarter GDP of two weeks ago, wholesale inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released just before the GDP release...that report estimated that our seasonally adjusted wholesale inventories were valued at $611.45 billion at the end of December, $0.67 billion less than the $612.12 billion that this report shows...that would imply that the quarterly change in 4th quarter inventories was underestimated at a $2.7 billion annual rate, which would mean that the growth rate of 4th quarter GDP was underestimated by about 0.06 percentage points based on what this report shows...

Job Openings and Layoffs Down, Quitting Up, & Hiring Little Changed In December

the Job Openings and Labor Turnover Survey (JOLTS) report for December from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 167,000, from 5,987,000 in November to 5,811,000 in December, after November job openings were revised 108,000 higher, from 5,879,000 to 5,987,000...December's jobs openings were still 4.9% higher than the 5,539,000 job openings reported in December a year ago, as the job opening ratio expressed as a percentage of the employed at 3.8% was down from the 3.9% logged in November, while it was up from 3.7% in December a year ago...the professional and business services sector, with a 119,000 job opening decrease to 956,000, saw the largest decrease, while the health care and social assistance sector saw job openings increase by 54,000 to 1,062,000 (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked to at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in December, seasonally adjusted new hires totaled 5,488,000, down by 5,000 from the revised 5,493,000 who were hired or rehired in November, as the hiring rate as a percentage of all employed remained unchanged at 3.7% in December, but was up from 3.6% in December a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations rose by 26,000, from 5,212,000 in November to 5,238,000 in December, as the separations rate as a percentage of the employed rose from 3.5% to 3.6%, which also up from 3.5% in December a year ago (see table 3)...subtracting the 5,238,000 total separations from the total hires of 5,488,000 would imply an increase of 250,000 jobs in December, somewhat more than the revised payroll job increase of 160,000 for December reported in the January establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,259,000 of us voluntarily quit our jobs in December, up from the revised 3,161,000 who quit their jobs in November, while the quits rate, widely watched as an indicator of worker confidence, rose by 0.1% to 2.2% of total employment, while it was also up from 2.1% a year earlier (see details in table 4)....in addition to those who quit, another 1,645,000 were either laid off, fired or otherwise discharged in December, down by 80,000 from the revised 1,725,000 who were discharged in November, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was the same as the discharges rate of 1.1% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 334,000 in November, up from 326,000 in November, for an 'other separations rate’ of 0.2%, the same as in November but down from 0.3% in December of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...   

 

(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 from the aforementioned GGO posts, contact me…)   

Sunday, February 4, 2018

January’s jobs report; December’s income and outlays, construction spending and factory inventories..

as is usual with the first Friday of the month, the key economic release this week was the Employment Situation Summary for January from the Bureau of Labor Statistics...in addition, the week also saw the release of three December reports that included metrics which were either estimated or included in last week's advance estimate of 4th quarter GDP: the December report on Personal Income and Spending from the Bureau of Economic Analysis, and the December report on Construction Spending (pdf) and the Full Report on Manufacturers' Shipments, Inventories and Orders for December, both from the Census Bureau...the week also saw the last Fed manufacturing survey for the month; the January Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +33.4, from last month's +29.7, it's highest reading in 12 years, suggesting they're now into a period of booming growth in the boom-bust Texas oil patch economy...

the week’s privately issued reports included the ADP Employment Report for January, the light vehicle sales report for January from Wards Automotive, which estimated that vehicles sold at a 17.07 million annual rate in January, down 3.9% from the 17.76 million annual rate in December, and down 2.3% from the 17.48 million annual rate in January a year ago, and the Case-Shiller Home Price Index for November from S&P Case-Shiller, which reported that home prices nationally during September, October and November averaged 6.4% higher than prices for the same homes that sold during the same 3 month period a year earlier....in addition, the week also saw the widely followed purchasing manager's survey from the Institute for Supply Management (ISM): the January Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) slipped to 59.1% in January, down from 59.3% in December, which still suggests an ongoing expansion in manufacturing firms nationally...

Employers Add 200,000 Jobs in January, Unemployment Rate Unchanged at 4.1%

the Employment Situation Summary for January indicated modest job creation over the month, slightly offset by revisions to prior months, while the household survey saw most of its metrics unchanged…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 200,000 jobs in January, after the previously estimated payroll job increase for November was revised down from 252,000 to 216,000, while the payroll jobs increase for December was revised up from 148,000 to 160,000…that means that this report represents a total of 176,000 more seasonally adjusted payroll jobs than the report of a month ago, exactly in line with the past year's average of 176,000 jobs per month...the unadjusted data, however, shows that there were actually 3,085,000 fewer payroll jobs extant in January than in December, as the normal post holiday seasonal layoffs in areas such as retail, wholesale, goods transportation, leisure and hospitality were averaged out by the seasonal adjustments..

as is usual for January, this report included the results of the annual benchmark revision, which revised prior reports and set March 2017 (the benchmark) at  145,969,000 payroll jobs, 146,000 more jobs than was previously reported, and which thereby changed job totals for every month in 2017 by totals of similar magnitude (as shown in Table A of the press release)...as a result of this revision, 2017 job growth totaled 2,173,000 payroll jobs, up from the previously published total of 2,055,000, while job growth in earlier years was revised slightly as well...since all the newly revised figures are now incorporated into this months report as if previously reported totals had never been reported, that's the way we'll cover it...

seasonally adjusted job increases in January were spread through through both the goods producing and the private service sectors and government, with only the utility sector seeing a job loss of 1,400 jobs...after the seasonal adjustments, 36,000 jobs were added in construction, with 26,300 of those working for specialty trade contracts, split between both nonresidential and residential specialty trade contractors...another 35,000 seasonally adjusted jobs were added in accommodation and food services, with the addition of 31,100 jobs in bars and restaurants...employment in health care and social assistance rose by 25,800, with the addition of 12,700 jobs in hospitals...the broad professional and business services sector added 23,000 jobs, despite the loss of 10,100 in accounting and bookkeeping services, as many other business services subsectors saw modest job gains...in addition, the retail sector saw a seasonally adjusted gain of 15,400 jobs, after the actual 574,400 post holiday layoffs were adjusted for the normal level of January layoffs...meanwhile, other major sectors, including resource extraction, wholesale trade, transportation and warehousing, information, financial activities, and government all saw more modest job gains during the month...

the establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $26.74 an hour in January, after it had increased by a revised 11 cents an hour in December; at the same time, the average hourly earnings of production and non-supervisory employees increased by 3 cents to $22.34 an hour...employers also reported that the average workweek for all private payroll employees decreased by 0.2 hour to 34.3 hours in January, while hours for production and non-supervisory personnel was down by 0.1 hour at 33.6 hours...at the same time, the manufacturing workweek decreased by 0.2 hour to 40.6 hours, while average factory overtime was unchanged at 3.5 hours...

meanwhile, the January household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 409,000 to 154,430,000, while the estimated number of those unemployed rose by 108,000 to 6,684,000; which led to a 518,000 increase in the total labor force...however, those numbers were skewed as the benchmark revision to the civilian noninstitutional population showed that December's population had been understated by 488,000, which meant that the population dependent metrics all had to be adjusted for that revision....with a January population increase of 183,000 on top of that, that meant the number of employment aged individuals who were not in the labor force increased to a record 95,665,000, the labor force participation rate remained unchanged at 62.7%, and the employment to population ratio, which we could think of as an employment rate, also remained unchanged 60.1% in January.....at the same time, the increase in the number unemployed was not large enough to increase the unemployment rate, as it remained at 4.1%...meanwhile, the number of those who reported they were forced to accept just part time work rose by 74,000, from 4,915,000 in December to 4,989,000 in January, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 8.1% of the labor force in December to 8.2% in January...

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

December Personal Income Rose 0.4%, Personal Spending Rose 0.4%

the December Income and Outlays report, released on Monday by the Bureau of Economic Analysis, was actually concurrent with the release of the advance report 4th quarter GDP on the prior Friday, and hence the data in this report has already been included in that report....and like that report, which we reported on last week, all the dollar values reported here are at an annual rate and seasonally adjusted, ie, they tell us what income, spending and saving would be for a year if December's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from November to December....thus, when the opening line of the press release for this report tell us "Personal income increased $58.7 billion (0.4 percent) in December...", they mean that the annualized figure for all types of personal income in December, $16,686.7 billion, was $58.7 billion, or less than 0.4% greater than the annualized personal income figure for November; the actual increase in personal income in December over November is not given....similarly, disposable personal income, which is income after taxes, rose by more than 0.3%, from an annual rate of $14,541.0 billion in November to an annual rate of $14,589.0 billion in December...the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in December, the largest contributors to the $57.8 billion annual rate of increase in personal income were a $38.6 billion increase in wages and salaries and a $17.3 billion increase in dividend and interest income…

meanwhile, seasonally adjusted personal consumption expenditures (PCE) for December, which were included in the change in real PCE in 4th quarter GDP that we reviewed last week, rose at a $54.2 billion annual rate to a level of $13,717.2 billion in consumer spending annually, 0.4% higher than in November, which itself was revised from the originally reported annual rate of $13,635.8 billion to $13,663.0 billion...the current dollar increase in December spending included a $50.1 billion annualized increase to an annualized $9,286.7 billion spending for services, a $10.5 billion increase to $1,531.9 billion in annualized spending for durable goods, and a $6.3 billion decrease to $2,898.5 billion in annualized spending for non durable goods...total personal outlays for December, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $66.4 billion to $14,160.0 billion, which left personal savings, which is disposable personal income less total outlays, at a $351.6 billion annual rate in December, down from the revised $365.1 billion in annualized personal savings in November...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to a twelve year low of 2.4%, from 2.5% in November, which itself was originally reported at 2.9%..

while our personal consumption expenditures accounted for 69.6% of our fourth quarter GDP, before they were included in the measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption.....that's done with the price index for personal consumption expenditures, which is also included in this report, which is a chained price index based on 2009 prices = 100....from Table 9 in the pdf for this report, we find that that index rose from 113.515 in November to 113.640 in December, giving us a month over month inflation rate of 0.1101%, which the BEA reports as an increase of +0.1%….at the same time, Table 11 gives us a year over year PCE price index increase of 1.7%, and a core price increase, excluding food and energy, of 1.5% for the year, both still below the Fed's inflation target...applying the December inflation adjustment to the change in December PCE shows that real PCE was up 0.286%, which BEA reports as a 0.3% increase in their tables...note that when those PCE price indexes are applied to a given month's annualized current dollar PCE, it yields that month's annualized real PCE in chained 2009 dollars, which aren't really dollar amounts at all, but merely the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....those results are shown in tables 7 and 8 of the PDF, where the quarterly figures given are identical to those shown in table 3 in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP...

Construction Spending Rose 0.7% in December after Prior Months Were Revised Lower

the Census Bureau's report on construction spending for December (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,253.3 billion annually if extrapolated over an entire year, which was 0.7 percent (±1.0 percent)* above the revised November estimate of $1,245.1 billion annually, and 2.6 percent (±1.3 percent) above the estimated annualized level of construction spending in December of last year...the annualized November construction spending estimate was revised 0.9% lower, from $1,257.0 billion to $1,245.1 billion, while the annual rate of construction spending for October was revised 0.8% lower, from $1,247.1 billion to $1,237.65 billion...for all of 2017, construction spending totaled $1,230.6 billion, 3.8 percent (±1.0 percent) above the $1,185.7 billion spent in 2016...

the Census release gives us further details on changes in construction by category: Spending on private construction was at a seasonally adjusted annual rate of $963.2 billion, 0.8 percent (±1.2 percent)* above the revised November estimate of $955.9 billion. Residential construction was at a seasonally adjusted annual rate of $526.1 billion in December, 0.5 percent (±1.3 percent)* above the revised November estimate of $523.8 billion. Nonresidential construction was at a seasonally adjusted annual rate of $437.1 billion in December, 1.1 percent (±1.2 percent)* above the revised November estimate of $432.1 billion. The value of private construction in 2017 was $950.7 billion, 5.8 percent (±1.0 percent) above the $898.7 billion spent in 2016. Residential construction in 2017 was $515.9 billion, 10.6 percent (±2.1 percent) above the 2016 figure of $466.6 billion and nonresidential construction was $434.8 billion, 0.6 percent (±1.0 percent)* above the $432.1 billion in 2016.

with the downward revisions to the prior months, construction spending for all three months of the 4th quarter was lower than was reported by the BEA in their advance estimate of 4th quarter GDP last week....as we saw above, annualized construction spending for October was revised $9.45 billion lower, and annualized construction spending for November was revised $11.9 billion lower...the BEA's key source data and assumptions (xls) for 4th quarter GDP indicates that they had estimated an annualized $3.6 billion or 1.1% increase in residential construction from previously reported November levels, an annualized $1.9 billion or 0.4% decrease in nonresidential construction from previously reported November levels, and a $0.9 billion or 0.3% decrease in public construction from previously reported November levels...totaling those changes, the BEA reported construction spending $0.8 higher than previously reported November levels in the 4th quarter GDP report...with this report showing December construction spending was up at an $8.2 billion annual rate from November figures that were revised $11.9 billion lower, that means the annualized construction figure used for December in the GDP report was $4.5 billion too high...averaging the overstatements in the annual rates for the three months of the 4th quarter, that would mean that this report suggests that construction spending was overestimated by $8.6 billion (at an annual rate) in the 4th quarter GDP report, implying a downward revision to GDP components at a rate that would mean a subtraction of about 0.21 percentage points from 4th quarter GDP when the 2nd estimate is released at the end of February...

Factory Shipments Up 0.5%, Inventories Up 0.5%

the Census Bureau's summary of the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for December, which precedes the detailed spreadsheet, is quite complete, so we'll just quote directly from it here, starting with the summary paragraph: 

  • New orders for manufactured goods in December, up six of the last seven months, increased $8.5 billion or 1.7 percent to $498.2 billion, the U.S. Census Bureau reported today. This followed a 1.7 percent November increase. Shipments, up twelve of the last thirteen months, increased $2.9 billion or 0.6 percent to $495.4 billion. This followed a 1.4 percent November increase. Unfilled orders, up four consecutive months, increased $7.1 billion or 0.6 percent to $1,144.4 billion. This followed a 0.1 percent November increase. The unfilled orders-to-shipments ratio was 6.59, up from 6.58 in November. Inventories, up thirteen of the last fourteen months, increased $3.3 billion or 0.5 percent to $669.2 billion. This followed a 0.5 percent November increase. The inventories-to-shipments ratio was 1.35, unchanged from November.
  • New orders for manufactured durable goods in December, up four of the last five months, increased $6.8 billion or 2.8 percent to $249.3 billion, down from the previously published 2.9 percent increase. This followed a 1.7 percent November increase. Transportation equipment, also up four of the last five months, led the increase, $5.7 billion or 7.1 percent to $86.9 billion. New orders for manufactured nondurable goods increased $1.7 billion or 0.7 percent to $248.9 billion. 
  • Shipments of manufactured durable goods in December, up seven of the last eight months, increased $1.2 billion or 0.5 percent to $246.5 billion, down from the previously published 0.6 percent increase. This followed a 1.3 percent November increase. Primary metals, up five of the last six months, led the increase, $0.5 billion or 2.5 percent to $20.7 billion. Shipments of manufactured nondurable goods, up eight of the last nine months, increased $1.7 billion or 0.7 percent to $248.9 billion. This followed a 1.6 percent November increase. Petroleum and coal products, up six consecutive months, led the increase, $0.7 billion or 1.4 percent to $50.2 billion. 
  • Unfilled orders for manufactured durable goods in December, up four consecutive months, increased $7.1 billion or 0.6 percent to $1,144.4 billion, unchanged from the previously published increase. This followed a 0.1 percent November increase. Transportation equipment, up following two consecutive monthly decreases, led the increase, $6.0 billion or 0.8 percent to $775.9 billion. 
  • Inventories of manufactured durable goods in December, up seventeen of the last eighteen months, increased $1.4 billion or 0.3 percent to $406.8 billion, unchanged from the previously published increase. This followed a 0.3 percent November increase. Machinery, up ten of the last eleven months, led the increase, $0.4 billion or 0.5 percent to $70.4 billion. Inventories of manufactured nondurable goods, up seven consecutive months, increased $1.9 billion or 0.7 percent to $262.4 billion. This followed a 0.9 percent November increase. Petroleum and coal products, up six consecutive months, led the increase, $0.9 billion or 2.1 percent to $41.4 billion. By stage of fabrication, December materials and supplies decreased 0.1 percent in durable goods and were virtually unchanged in nondurable goods. Work in process increased 0.4 percent in durable goods and increased 2.1 percent in nondurable goods. Finished goods increased 0.8 percent in durable goods and increased 0.7 percent in nondurable goods.

the BEA's key source data and assumptions (xls) for 4th quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase by $3.0 billion, so the $1.9 billion increase would indicate a that they overestimated the 3rd quarter GDP inventory component by about $1.1 billion, which would imply that 4th quarter GDP would have to be adjusted downwards by around 0.03 percentage points to account for what this report shows…

 

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

Sunday, January 28, 2018

4th quarter GDP; December durable goods, new home sales, existing home sales

the key economic release of the past week was the 1st estimate of 4th quarter GDP from the Bureau of Economic Analysis; other widely watched releases included the advance report on durable goods for December and the December report on new home sales, both from the Census bureau, and the existing home sales report for December from the National Association of Realtors (NAR)…we also saw the release of the Chicago Fed National Activity Index (CFNAI) for December, a weighted composite index of 85 different economic metrics, which rose to +0.27 in December, up from +0.11 in November, which was revised from the +0.15 reported last month....that left the 3 month average of the index at +0.42 in December, down from a revised  +0.43  in November, which still indicates that national economic activity continued at a pace above the historical trend over the 4th quarter...in addition to those reports, the BLS also released the Regional and State Employment and Unemployment for December on Friday, which breaks down the establishment survey and household survey data from the monthly jobs report released four weeks earlier by region and by state..

  this week also saw the release of two more regional Fed manufacturing surveys for January: 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 fell to +14 in January from +20 in December, still suggesting a modest expansion in that region's manufacturing, and the Kansas City Fed manufacturing survey for January, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to 16 in January, up from 13 in December and 15 in November, also indicating an ongoing expansion of that region's manufacturing...

4th Quarter GDP Up at 2.6% Rate as Imports & Inventory Cut Growth in Half

our economy grew at a 2.6% rate in the 4th quarter,  somewhat slower than the growth rate of the third quarter, as increasing imports and slower growth in private inventories partially offset stronger personal consumption and fixed investment growth...the Advance Estimate of 4th Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 2.6% annual rate over the output of the 3rd quarter of 2017, when our real output grew at a 3.2% real rate, as increasing imports subtracted 1.96 percentage points from 4th quarter growth and slower inventory growth subtracted another 0.67 percentage points...for the entire year, our economy grew at a 2.3% rate, 0.8 percent faster than the 1.5% growth that we saw in 2016...in current dollars, our fourth quarter GDP grew at a 5.0% annual rate, increasing from what would work out to be a $19,500.6 billion a year output rate in the 3rd quarter to a $19,738.9 billion annual rate in the 4th quarter, with the headline 2.6% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.4%, aka the GDP deflator, was applied to the current dollar change...

as usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have averaged +/-0.7% in either direction for nominal GDP, and +/- 0.6% for real (inflation adjusted) GDP before the third estimate for the quarter is released, which will be two months from now...also note that December construction and non-durables inventory data have yet to be reported, and that the BEA assumed a small decrease in nonresidential construction, an increase in residential construction, and a large increase in nondurable manufacturing inventories for December before they estimated 4th quarter output (see their Key source data and assumptions Excel file)..

while we cover the details on the 4th quarter below, remember that the press release for GDP 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 2009, and then that all percentage changes in this report are calculated from those 2009 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 1st estimate of 4th quarter GDP, which is linked to on the sidebar of the BEA’s press release, which also offer links to just the tables on Excel and other technical notes...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 1st quarter of 2014, table 2, which shows the contribution of each of the components to the GDP growth figures for those quarters and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the GDP components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...

personal consumption expenditures (PCE), which accounts for roughly 69% of GDP, grew at a 6.65% rate in current dollars in the 4th quarter, which was reduced to a 3.8% real growth rate of goods and services consumed for GDP purposes, after an annualized PCE price index increase of 2.8% was used to adjust that consumer spending for inflation.... consumer outlays for durable goods rose at a 12.1% rate in current dollars while prices for those durable goods fell at a 1.8% rate, and thus the BEA found real growth in output of consumer durables rose at a 14.2% rate, as real consumption of motor vehicles and parts grew at a 16.7% rate while real consumption of recreational vehicles, furniture and other durable goods all increased at a double digit rate as well...the BEA also found that real output of consumer non-durable goods grew at a 5.2% rate, after growth in consumer spending for non-durables at a 9.4% rate was adjusted for non-durable goods prices that rose at a 4.0% rate, as strong growth in real consumption of food, clothing and other non-durable goods more than offset slightly lower consumption of gasoline and other energy goods....meanwhile, the 4.9% nominal growth in consumer outlays for services was deflated by a 3.1% average increase in prices for personal services to show real output of consumer services grew at a 1.8% annual rate, as a strong real growth rate in health care services and housing and utilities offset a small pullback in use of transportation and recreational services...as a result of those changes in growth from the 3rd to the 4th quarter, the increase in real outlays for durable goods added 1.02 percentage points to the GDP growth rate, increased consumption of non-durable goods added 0.74 percentage points, and increased consumption of services added 0.82  percentage points to the growth rate of the economy in the 4th quarter..

the change in other components of the change in GDP is computed by the BEA in the same manner that we have just shown for computing PCE; ie, the actual annualized increase in current dollar spending for the quarter is adjusted with an annualized inflation factor for that component, yielding the change in real units of goods or services produced in the quarter at an annual rate...thus, real gross private domestic investment, which had grown at a real 7.3% annual rate in the 3rd quarter, grew at a real 3.6% annual rate from those levels in the 4th quarter...however, real growth in fixed investments increased,  growing at a 7.9% annual rate in the 4th quarter, after growing at a 2.4% rate in the 3rd quarter...among fixed investments, real non-residential fixed investment grew at a 6.8% rate as real investment in non-residential structures grew at a 1.4% rate and added 0.04 percentage points to 4th quarter GDP, real investment in equipment grew at a 11.4% rate and added 0.62 percentage points to 4th quarter GDP, and real investment in intellectual property grew at 4.5% rate and added 0.18 percentage points to GDP...at the same time, real residential investment grew at 11.6% rate and added 0.42 percentage points to GDP....for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3...

meanwhile, real private inventories grew by an inflation adjusted $9.2  billion in the 4th quarter, after growing at an inflation adjusted $38.5 billion in the 3rd quarter, and as a result the $29.3 billion negative change in real inventory growth subtracted 0.67 percentage points from the 4th quarter's growth rate, after $33.0 billion in real inventory growth in the 3rd quarter had added 0.79% to that quarter's GDP....however, since smaller growth in inventories indicates that less of the goods produced during the quarter were left in storage or "sitting on the shelf”, their decrease by $29.3 billion in turn means real final sales of GDP were actually greater by that amount, and hence real final sales of GDP rose at a 3.2% rate in the 4th quarter, up from the real final sales growth rate of 2.4% in the 3rd quarter, when the greater increase in inventory growth meant that the quarter’s growth in real final sales was lower...

after an adjustment for a 5.8% growth rate in export prices, our real exports of goods and services grew at a 6.9% rate in the fourth quarter, an increase from their 2.1% 3rd quarter growth rate...however, after an adjustment for 6.0% growth rate in import prices, our real imports still grew at a 13.9% rate in the 4th quarter after falling at a 0.7% rate in the 3rd quarter....as you'll recall, exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted elsewhere in this GDP calculation), while increases in imports subtract from GDP because they represent either consumption or investment that was added to another GDP component that shouldn't have been because it was not produced here....thus the 4th quarter increase in real exports added 0.82 percentage points to 4th quarter GDP, while the greater 4th quarter import increase subtracted 1.96 percentage points from 3rd quarter GDP, and thus our deteriorating trade balance subtracted a total of 1.13 percentage points from our 4th quarter GDP, after our improved trade deficit had added 0.36  percentage points to GDP in the third quarter..

finally, real consumption and investment by government increased at a 3.0% annual rate in the 4th quarter, after growing at a 0.7% rate in the 3rd quarter, as federal government consumption and investment grew at a 3.5% rate, while state and local consumption and investment grew at a 2.6% rate....inflation adjusted federal spending for defense grew at a 6.0% rate and added 0.22 percentage points to 4th quarter GDP growth, while real non-defense federal consumption and investment grew at a 0.1% rate and had no statistical impact on GDP....note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services....meanwhile, state and local government investment and consumption expenditures grew at a 2.6% annual rate and added 0.28 percentage points to the growth of 4th quarter GDP, as real growth in state and local consumption expenditures added 0.06 percentage points while real state and local investment grew at a 13.1% annual rate and added 0.21 percentage points to GDP...

December Durable Goods: New Orders Up 2.9%, Shipments Up 0.6%, Inventories Up 0.3%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for December (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $7.0 billion or 2.9 percent to $249.4 billion in December, after November's new orders were revised from the $241.4 billion reported last month to $242.4 billion, now 1.7% more than October's new orders...for the year, 2017’s new orders were 5.8% above those of 2016, an increase from the 5.4% year over year change we saw in this report last month....a jump in the volatile monthly new orders for transportation equipment was largely responsible for the December increase, as new transportation equipment orders rose $6.0 billion or 7.4 percent to $87.2 billion, on a 55.3% increase to $5,329 million in new orders for defense aircraft and a 15,9% increase to $14,460 in new orders for commercial aircraft....excluding orders for transportation equipment, new orders still rose 0.6%, while excluding just new orders for defense equipment, new orders rose 2.2%....at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $207 million or 0.3% to $67,135 million...

meanwhile, the seasonally adjusted value of December shipments of durable goods, which were included as inputs into various components of 4th quarter GDP after adjusting for changes in prices, increased by $1.5 billion or 0.6 percent to $246.8 billion, after the value of November shipments was revised from from $244.5 billion to $245.3 billion, now up 1.3% from October...shipments of fabricated metal products, up $0.5 billion or 1.5 percent to $33.5 billion, saw the largest percentage increase....at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 17th time in the past 18 months, increasing by $1.3 billion or 0.3 percent to $406.5 billion, after November inventories were revised from $405.2 billion to $405.239 billion, still up 0.2% from October....a $0.4 billion or 0.6 percent increase to $70.4 billion in inventories of machinery was the largest inventory increase, while a $285 million or 0.4 percent decrease to $66,912 million in inventories of commercial aircraft was the largest decrease...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but obviously volatile new orders, increased for the fourth month in a row, rising by $6.9 billion or 0.6 percent to $1,144.1 billion, following a November increase of 0.1%, which was statistically unchanged from what was reported a month ago...a $6.0 billion or 0.8 percent increase to $775.9 billion in unfilled orders for transportation equipment was responsible for most of the gain, as unfilled orders excluding transportation equipment orders were up $892 million or 0.2% to $368,222 million...compared to the end of 2016, the unfilled order book for durable goods is now 1.9% above the level of last December, with unfilled orders for nondefense capital goods less aircraft now 2.8% above their year ago level, led by a 5.1% increase in the backlog of orders for machinery...   

December New Home Sales Reported Lower After Sales in Prior Months Revised Down

the Census report on New Residential Sales for December (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 625,000 homes annually during the month, which was 9.3 percent (±11.0 percent)* below the revised November annual rate of 689,000 new single family home sales, but was 14.1 percent (±13.0 percent) above the estimated annual rate that new homes were selling at in December of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether December new home sales rose or fell from those of November, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales new single family homes in November were revised from the annual rate of 733,000 reported last month to an annual rate of 689,000, while home sales in October, initially reported at an annual rate of 685,000 and revised to 624,000 last month, were revised even lower, to a 599,000 a year rate with this report, and while September's annualized home sale rate, initially reported at an annual rate of 677,000 and revised from the initially revised 645,000 a year rate to a 635,000 a year rate last month, were revised up to a 639,000 rate with this release...

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 43,000 new single family homes sold in December, down from the estimated 49,000 new homes that sold in November and the 47,000 that sold in October.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in December was $335,400, up from the median sale price of $334,900 in November and up from the median sales price of $327,000 in December a year ago, while the average December new home sales price was $398,900, up from the $383,600 average sales price in November, and up from the average sales price of $382,500 in December a year ago....a seasonally adjusted estimate of 295,000 new single family houses remained for sale at the end of December, which represents a 5.7 month supply at the December sales rate, up from the reported 4.6 months of new home supply in November...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales decrease to 625,000 Annual Rate in December and A few Comments on December New Home Sales... 

December Existing Home Down 3.6% After November Sales Revised Lower

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell by 3.6% from November to December, projecting that 5.57 million existing homes would sell over an entire year if the December home sales pace were extrapolated over that year, a pace that was 1.1% above the annual sales rate projected in December of a year ago...November sales are now shown at a 5.78 million annual rate, revised down from the 5.81 million annual rate indicated by last month's report...total existing home sales for 2017 added up to 5.51 million, a 1.1% increase from the 5.45 million homes that were sold in 2016...the NAR also reported that the median sales price for all existing-home types was $246,800 in December, which was down from $247,200 in November, but 5.8% higher than in December a year earlier, which they report as "the 70th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Fade in December; 2017 Sales Up 1.1 Percent ", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf) to see what actually transpired during the month...this unadjusted data indicates that roughly 427,000 homes sold in December, up by 0.5% from the 425,000 homes that sold in November, but down by 2.3% from the 437,000 homes that sold in December of last year, so we can see that it was the seasonal adjustments that caused the headline figures to show a month over month decrease and a year over year increase....that same pdf indicates that the median home selling price for all housing types fell less than 0.2%, from a revised $247,200 in November to $246,800 in December, while the average home sales price was $288,200, down 0.4% from the $289,500 average sales price in November, but up 4.8% from the $274,900 average home sales price of December 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 Fade in December; 2017 Sales Up 1.1 Percent" and A Few Comments on December 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 from the aforementioned GGO posts, contact me…)   


Sunday, January 21, 2018

December industrial production and new home construction

the only major reports released this week were the December report on Industrial Production and Capacity Utilization from the Fed, and the November report on New Residential Construction, from the Census Bureau... the week also saw the release of the first two regional Fed manufacturing surveys for January: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index slipped from +19.6 in December to +17.7 in January, still suggesting a strong 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 fell from a revised reading of +27.9 in December to + 22.2 in January, their lowest reading in 5 months, but still indicating a large plurality of the region's manufacturing firms reported increases in their activity this month...

Industrial Production Rises 0.9% in December After October & November Output Revised Higher

the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.9% in December after falling by a revised 0.1% in November and after rising by a revised 1.8% in October, which together meant that industrial production rose at a 8.2% annual rate in the 4th quarter from the hurricane impacted levels of the 3rd quarter....the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 107.5 in December from 106.5 in November, which was revised from the 106.4 reported last month, while at the same time the index for October was revised from 106.1 to 106.6, and the index for September was revised from 104.9 to 104.8....year over year industrial production is now up 3.6%, up from last month's 3.4% year over year increase....

the manufacturing index, which accounts for more than 77% of the total IP index, was unchanged at 103.2 in December but was reported 0.2% higher, after the November index was revised down to 103.0, while indices for prior months went statistically unrevised....meanwhile, the mining index, which includes oil and gas well drilling, rose from 111.8 in November to 113.6 in December, after the November index was revised down from 111.9, which lifted the mining index to a level 11.5% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, rose by 5.6% in December,  from 102.3 to 108.1, after the November utility index was revised from 101.6 to 102.3, now 3.1% lower than October...since December 2016 was also colder than normal, meaning the utility index was elevated due to more heating, the utility index is just 1.8% higher than it was a year ago...

this report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose to 77.9% in December from 77.2% in November, which was revised from the 77.0% reported last month ...capacity utilization of NAICS durable goods production facilities rose from an upwardly revised 76.0% in November to 76.1% in December, while capacity utilization for non-durables producers slipped from an unrevised 78.0% to 77.9%...capacity utilization for the mining sector rose to 86.5% in December from 84.4% in November, which was originally reported as 84.5%, while utilities were operating at 80.4% of capacity during December, up from their 76.2% of capacity during November, which was previously reported at 75.1%...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 Down in December, Permits Little Changed

the December report on New Residential Construction (pdf) from the Census Bureau estimated that the number of new housing units started in December was at a seasonally adjusted annual rate of 1,192,000, which was 8.2 percent (±7.7 percent) below the revised November estimated annual rate of 1,299,000 housing units started, and was 6.0 percent (±11.7 percent)* below last December's annual rate of 1,268,000 housing starts...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, December housing starts could have been up by 5.7% or down by as much as 17.7% from those of last December, with revisions of a greater magnitude in either direction possible...in this report, the annual rate for November housing starts was revised from the 1,297,000 reported last month to 1,299,000, while October starts, which were first reported at a 1,290,000 annual rate, were revised from last month's initial revised figure of 1,256,000 annually to a 1,261,000 annual rate with this report....

those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 80,300 housing units were started in December, down from the 89,100 units that were started in November...of those housing units started in December, an estimated 54,300 were single family homes and 25,700 were units in structures with more than 5 units, down from the revised 69,300 single family starts in November and down from the 28,100 units started in structures with more than 5 units in November...

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 December, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,302,000, which was 0.1 percent (±1.4%)* below the revised November rate of 1,303,000 permits, but was 2.8 percent (±1.9 percent) above the rate of building permit issuance in December a year earlier...the annual rate for housing permits issued in November was revised up from the originally reported 1,298,000....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 93,200 housing units were issued in December, down from the revised estimate of 97,000 new permits issued in November...the December permits included 56,500 permits for single family homes, down from 62,000 single family permits issued in November, and 33,900 permits for housing units in apartment buildings with 5 or more units, up from 31,900 such multifamily permits a month earlier... for more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.192 Million Annual Rate in December and Comments on December Housing Starts...

 

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