Sunday, September 24, 2017

August’s new home construction and existing home sales

there were just two reports with large followings released this week: the August report on New Residential Construction from the Census Bureau and the Existing Home Sales Report for August from the National Association of Realtors (NAR)...in addition, the Bureau of Labor Statistics released the August Import-Export Price Index, which showed that average prices for both imports and for exports rose 0.6% in August, figures which will be used by the BEA to adjust next week’s preliminary international trade data for inflation...this week also saw the release the Philadelphia Fed Manufacturing Survey for September, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions rose from +18.9 in August to +23.8 in September, suggesting continuing strong growth in that region's manufacturing...

New Housing Construction Little Changed in August; Building Permits Rising

the August report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started during the month was at a seasonally adjusted annual rate of 1,180,000, which was 0.8 percent (±9.6%)* below the revised July estimated annual rate of 1,190,000 housing unit starts, but was 1.4 percent (±8.9 percent)* above last August's pace of 1,164,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, August's housing starts could have been up by 8.8% or down by as much as 10.4% from those of July, with even larger revisions possible after a number of months...in this report, the annual rate for July housing starts was revised from the 1,155,000 reported last month  to 1,190,000, while June starts, which were first reported at a 1,215,000 annual rate, were revised up from last month's initial revised figure of 1,213,000 annually to 1,217,000 annually 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 Census field agents, which estimated that 103,300 housing units were started in August, down from the 112,900 units started in July...of those housing units started in August, an estimated 76,100 were single family homes and 26,700 were units in structures with more than 5 units, down from the revised 79,200 single family starts in July, and down from the 38,200 units started in structures with more than 5 units in July...

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 August, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,300,000 housing units, which was 5.7 percent (±2.0 percent) above the revised July rate of 1,230,000 permits, and was 8.3 percent (±1.6 percent) above the rate of building permit issuance in August a year earlier...the annual rate for housing permits issued in July was revised from 1,223,000 up to 1,230,000  annually....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 122,600 housing units were issued in August, up from the revised estimate of 101,000 new permits issued in July...the August permits included 76,500 permits for single family homes, up from 69,100 in July, and 42,500 permits for housing units in apartment buildings with 5 or more units, up from 28,700 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 1.180 Million Annual Rate in August and Comments on August Housing Starts...

August Existing Home Sales Down 1.7 from July

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell by 1.7% from July to August, the 4th decrease in five months, projecting that 5.35 million homes would sell over an entire year if the August home sales pace were extrapolated over that year, a pace that was just 0.2% above the annual sales rate projected in August of a year ago….July sales at a 5.44 million annual rate were essentially unrevised...the NAR also reported that the median sales price for all existing-home types was $253,500 in August, 5.6% higher than in August a year earlier, which they report as "the 66th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Subside 1.7 Percent in August", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed  sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 535,000 homes sold in August, up by 4.3% from the 513,000 homes that sold in July, but down by 0.7% from the 539,000 homes that sold in August of last year, so we can see that it was a seasonal adjustment that caused the annualized published figures up to show a decrease...that same pdf indicates that the median home selling price for all housing types fell 1.8%, from a revised $258,100 in July to $253,500 in August, while the average home sales price was $294,600, down 1.4% from the $298,800 average in July, but up 4.5% from the $282,000 average home sales price of August a year ago, with the regional average home sales prices ranging from a low of $231,700 in the Midwest to a high of $394,700 in the West...

for both seasonally adjusted and unadjusted graphs and additional commentary on this report, check out the following two posts from Bill McBride at Calculated Risk: NAR: "Existing-Home Sales Subside 1.7 Percent in August " and A Few Comments on August 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, September 17, 2017

August’s consumer and producer prices, retail sales, and industrial production; July’s business inventories and JOLTS

reports released this past week included Retail Sales for August and Business Sales and Inventories for July from the Census Bureau, August Industrial Production and Capacity Utilization from the Fed, and the August Consumer Price Index, the August Producer Price Index, the Job Openings and Labor Turnover Survey (JOLTS) report for July and the Regional and State Employment and Unemployment report for August, all from the Bureau of Labor Statistics...this week also saw the release of the Empire State Manufacturing Survey for September from the New York Fed, which covers New York and northern New Jersey; they reported their headline general business conditions index fell from +25.2 in August to +24.4 in September, still suggesting that First District manufacturing was growing at a robust pace...

Consumer Prices Up 0.4% in August on Higher Prices for Gasoline, Shelter

the consumer price index rose 0.4% in August, as much higher prices for gasoline and shelter were only slightly offset by lower prices for groceries...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose 0.4% in August after rising 0.1% in July, being unchanged in June and  falling 0.1% in May, but after rising 0.2% in April....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 244.786 in July to 245.519 in August, which left it statistically 1.939% higher than the 240.849 index reading in August of last year...with prices for energy much higher, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, as the unadjusted core index rose from 251.936 to 252.460, which left the core index 1.684% ahead of its year ago reading of 248.278...

the volatile seasonally adjusted energy price index was 2.8% higher in August after it had fallen 0.1% in July, 1.6% in June, and 2.7% in May, but after it rose by 1.1% in April, fell by 3.2% in March and by 1.0% in February, but after it had risen by 4.0% in January, 1.5% in December, 1.2% in November, 3.5% in October, and by 2.9% last September....thus, energy prices are now averaging 6.4% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were up by 6.1% in August, while the index for energy services fell by 0.1%, after falling  0.2% in July and 0.5% in June... the increase in the energy commodity index included a 6.3% jump in the price of gasoline, the largest component, and a 2.9% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, rose by an average of 1.1%…within energy services, the index for utility gas service fell by 0.5% after decreasing by 2.3% in July, but utility gas is still priced 5.1% higher than it was a year ago, while the electricity price index was unchanged, after increasing by 0.4% in July...energy commodities are now priced 10.3% above their year ago levels, with gasoline prices averaging 10.4% higher than they were a year ago...meanwhile, the energy services price index is now 2.9% higher than last August, as electricity prices have risen by 2.3% over that period..

the seasonally adjusted food price index was up 0.1% in August, after rising 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% in January, but after being unchanged in each of the prior 6 months, as prices for food purchased for use at home fell 0.2% in August, while prices for food bought to eat away from home was 0.3% higher, as prices at fast food outlets and at full service restaurants both rose 0.2%, while food at work sites and schools rose 3.9%...in the food at home categories, the price index for cereals and bakery products increased by 0.3%, as prices for bread other than white rose 1.3% and cookie prices rose 1.4%...the price index for the meats, poultry, fish, and eggs group was down 0.2% as roast beef prices fell 2.1% and ham prices fell 2.2%, while the index for dairy products was 0.4% lower on 1.5% decrease in the price of fresh whole milk...the fruits and vegetables index was 0.2% lower on a 1.0% decrease in prices for fresh fruits, as prices for oranges fell 5.2%...at the same time, the beverages index was 0.4% lower as roast coffee prices were down 2.4% and tea prices fell 1.4%....lastly, prices in the ‘other foods at home’ category were 0.1% lower on average, as salad dressing prices fell 2.1% while prepared frozen foods prices were 1.4% lower.......among food at home line items, only bacon, which is now priced 12.5% higher than a year ago has 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 0.2% in August and by 0.1% in each of the prior 4 months, the composite of all goods less food and energy goods was down 0.1% in August, while the more heavily weighted composite for all services less energy services was 0.4% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust August retail sales for inflation in national accounts data, the index for household furnishings and supplies was unchanged as prices for bedroom furniture rose 2.6% while prices for living room, kitchen, and dining room furniture fell 1.0%...the apparel price index, meanwhile, was 0.1% higher, as prices for boys' apparel rose 9.6% while prices for women's dresses fell 4.9%....prices for transportation commodities other than fuel were down 0.1%, as prices for new cars and prices for used cars and trucks both fell 0.2%...prices for medical care commodities were also 0.1% lower on a 0.5% decrease in prices for nonprescription drugs...at the same time, the recreational commodities index fell 0.4% on a 2.0% drop in TV prices and 2.7% lower prices for video equipment other than TVs...meanwhile, the education and communication commodities index was 0.8% lower on a 1.1% decrease in prices for computer software and accessories and 1.3% lower prices for educational books and supplies...lastly, a separate price index for alcoholic beverages was up 0.1%, while the price index for ‘other goods’ was down 0.4% on 1.1% decreases in the indexes for hair, dental, shaving, and miscellaneous personal care products and for stationery, stationery supplies, and gift wrap..

within core services, the price index for shelter rose 0.5% on a 0.4% increase in rents, a 0.3% increase in owner's equivalent rent, and a 5.1% increase in costs for lodging away from home at hotels and motels, while household operation costs were 0.3% higher...the index for medical care services was up 0.2% as prices for prescription eyeglasses and eye care rose 1.4%, while the transportation services index was 0.4% higher despite a 2.1% decrease in car and truck rentals on a 1.0% increase in motor vehicle insurance...at the same time, the recreation services price index was up 0.5% as admissions to movies, theaters, and concerts rose 1.0%, while the index for education and communication services was unchanged as a 0.9% increase in technical and business school tuition and fees was offset by a 0.3% decrease for college tuition....lastly, the index for other personal services was 0.1% higher as tax return preparation and other accounting services were 0.8% higher...among core prices, only the index for clocks, lamps, and decorator items, which is now 12.5% lower than a year ago, prices for toys, which have fallen by 10.45, and prices for wireless phone services, which have now dropped 13.2% from a year ago, have seen prices drop by more than 10% over the past year, while no line item has seen prices rise by a double digit magnitude in that span..   

Retail Sales Down by 0.2% in August after June and July Sales Revised Lower

seasonally adjusted retail sales were down in August after retail sales for June and July were revised much lower...the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $474.8 billion during  the month, which was down 0.2 percent (±0.5%)* from July's revised sales of $475.8 billion but 3.2 percent (±0.7 percent) above the adjusted sales in August of last year...July's seasonally adjusted sales were revised from $478.9 billion to $475.8 billion, while June sales were also revised lower, from $476.0 billion to $474.5 billion, with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 2.7%, from $476,699 million in July to $489,851 million in August, while they were up 3.5% from the $473,169 million of sales in August a year ago...the revision to June sales means that 2nd quarter sales were roughly $1.5 billion lower than previously reported, which would be enough to knock 0.12 percentage points from 2nd quarter GDP when the 3rd estimate is published at the end of the month…

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the August Census Marts pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from July to August in the first sub-column, and then the year over year percentage change for those businesses since last August in the 2nd column; the second pair of columns gives us the revision of last month’s July advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the June to July change under "Jun 2017 (r)evised" and the revised July 2016 to July 2017 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance July sale estimates, before this month's revision, is here....

August 2017 retail sales table

Industrial Production Down 0.9% in August on Weather

August saw the largest drop in US industrial production since May 2009, as Hurricane Harvey impacted Gulf of Mexico and inland oil & gas production and southeast Texas manufacturing and refining, while unseasonably cool temperatures on the East Coast reduced the demand for electricity....the Fed's G17 release on Industrial production and Capacity Utilization report indicated that industrial production fell by 0.9% in August, after rising by a revised 0.4% in July...as a result, industrial production is only up 1.5% from a year ago, as compared to last month's year over year increase of 2.2%....the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 104.7 in August from 105.7 in July, which was revised from the 105.5 that was reported for July a month ago...at the same time, the June reading for the index was unrevised at 105.3, the May reading for the index was revised up from 104.9 to 105.1, and the April index reading was revised from 104.7 to 104.9...

the manufacturing index, which accounts for more than 77% of the total IP index, fell by 0.3, from 103.6 in July to 103.3 in August, after July's manufacturing index was revised up from 103.4, and is now up 1.5% from a year ago....meanwhile, the mining index, which includes oil and gas well drilling, fell from 111.2 in July to 110.3 in August, after the July index was revised up from 111.0....however, the mining index still remains 9.7% higher than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, fell by 5.5% in August after rising a revised 1.5% in July and falling a revised 1.0% in June, and is now 7.8% below last August's level...

this report also provides capacity utilization figures, which are 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 from 76.9% in July to 76.1% in August...capacity utilization of NAICS durable goods production facilities rose from 74.3 in July to 74.5 in August, after July's figure was revised down from 74.4%, while capacity utilization for non-durables producers fell from an upwardly revised 77.9% to 77.2%...capacity utilization for the mining sector fell to 83.9% in August from 84.8% in July, which was originally reported as 84.6%, while utilities were operating at 73.9% of capacity during August, down from their 78.2% of capacity during July, which was revised up from 78.1%...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....

Producer Prices Up 0.2% in August on Higher Priced Energy Commodities

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.2% in August, as prices for finished wholesale goods increased 0.5%, while margins of final services providers increased by 0.1%...this followed a July report that indicated the PPI was down 0.1%, with prices for finished wholesale goods down 0.1%, and margins of final services providers down 0.2%, and a June report that indicated the PPI was up 0.1%, with prices for finished wholesale goods up 0.1%, and margins of final services providers up 0.2%....on an unadjusted basis, producer prices remain 1.9% higher than a year earlier, same as in June, but down from the 2.5% YoY increase seen in April, which had been the largest year over year increase in the PPI since February 2012...

as we noted, the price index for final demand for goods, aka 'finished goods', rose 0.5% in August, after slipping 0.1% in July, rising by 0.1% in June, falling by 0.6% in May, rising by 0.5% in April, falling by 0.2% in March, and rising by 0.4% in February, and by 1.0% in January... the index for wholesale energy prices rose 3.3% in August, while the price index for wholesale foods fell 1.3% and the index for final demand for core wholesale goods (ex food and energy) was 0.2% higher...the largest wholesale energy price changes were a 14.1% increase in the wholesale price of home heating oil and distillates and 13.4% in the wholesale price of LP gas, while wholesale gasoline prices were up 9.5%....meanwhile, a 8.6% decrease in the wholesale price of grains and a 6.5% decrease in the wholesale price for beef and veal pulled the wholesale food price index lower....among wholesale core goods, the index for industrial chemicals was up 2.9%, while wholesale prices for sanitary paper products were 1.1% lower…

at the same time, the index for final demand for services rose 0.1% in August, after falling by 0.2% in July, rising by 0.2% in June, and a revised 0.5% in May and 0.4% in April, as the July index for final demand for trade services was unchanged, the index for final demand for transportation and warehousing services rose 0.3%, while the index for final demand for services less trade, transportation, and warehousing services was 0.1% higher....among trade services, seasonally adjusted margins for fuels and lubricants retailers decreased 6.8%, while margins for TV, video, and major household appliances retailers rose 13.7%... among transportation and warehousing services, margins for truck transporters of freight were 0.9% higher...in the core final demand for services index, prices for consumer loans (partial) increased 1.7%..

this report also showed the price index for processed goods for intermediate demand was 0.4% higher, after falling 0.1% in July and 0.2% in June, but after rising by a revised 0.1% in May and 0.5% in April....the price index for intermediate energy goods rose 1.4%, while prices for intermediate processed foods and feeds fell 1.0%, and the core price index for processed goods for intermediate demand less food and energy was 0.4% higher, as prices for industrial chemicals rose 2.9%...prices for intermediate processed goods are now 4.1% higher than in August a year ago, now the tenth 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 fell 0.7% in August, after falling 0.4% in July, rising 1.5% in June, falling a revised 2.0% in May, and rising a revised 1.6% in April....the price index for crude energy goods rose 4.0%, as crude oil prices rose 11.0%, while the index for unprocessed foodstuffs and feedstuffs fell 5.2%, as prices for wheat dropped 20.6% and prices for slaughter steers and heifers fell 10.0%...in addition, the index for core raw materials other than food and energy materials rose 0.9%, as prices for iron and steel scrap rose 5.4% and wholesale prices for copper scrap rose 4.1% ...this raw materials index is now up 6.8% from a year ago, up from the year over year increase of 5.2% that we saw in June...

lastly, the price index for services for intermediate demand rose 0.2% in August after falling 0.3% in July, which was its first decrease since last September... the index for trade services for intermediate demand was 0.5% lower, as margins for intermediate chemicals and chemical products wholesalers fell 4.3 percent…the index for transportation and warehousing services for intermediate demand was up 0.3%, as intermediate prices for air mail and package delivery services other than USPS rose 1.3%...at the same time, the core price index for services less trade, transportation, and warehousing for intermediate demand was also 0.3% higher, as margins for business loans (partial) rose 5.3%, and intermediate services related to portfolio management rose 1.9%...over the 12 months ended in June, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.6% higher than it was a year ago...

July Business Sales and Business Inventories Both Up 0.2%

after the release of the August retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for July(pdf), which incorporates the revised July retail data from that August report and the earlier published 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 $1,358.8 billion in July, up 0.2 percent (±0.1%) from June revised sales, and up 4.9 percent (±0.4 percent) from July sales of a year earlier...note that total June sales were concurrently revised down from the originally reported $1,356.8 billion to $1,356,076 million....manufacturer's sales were up 0.3% to $474,337 million in July, and retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, also rose 0.3% to $419,400 million, while wholesale sales fell 0.1% to $446,437 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,873.9 billion at the end of July, up 0.2% (±0.1%) from June, and 3.0 percent (±0.3 percent) higher than in July a year earlier...the value of end of June inventories was revised up slightly from the $1,869.3 billion reported last month to $1,869.4 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $651,560 million, 0.2% higher than in June, inventories of retailers were valued at $619,956 million, 0.1% less than in June, while inventories of wholesalers were estimated to be valued at $602,352 million at the end of July, up 0.6% from June...

Job Openings were at a Record High in July,  with Hiring and Job Quitting Both Up

the Job Openings and Labor Turnover Survey (JOLTS) report for July from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 54,000, from 6,116,000 in June to a record high of 6,170,000 in July, after June job openings were revised lower, from 6,163,000 to 6,116,000...July jobs openings were also 3.3% higher than the 5,973,000 job openings reported for July a year ago, as the job opening ratio expressed as a percentage of the employed remained unchanged at 4.0% in July, which was also unchanged from a year ago...job openings increased in several sectors, with the 70,000 job opening increase to 253,000 openings in the transportation, warehousing, and utilities sector the largest increase for the month (see table 1 for more details)...like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in July, seasonally adjusted new hires totaled 5,501,000, up by 69,000 from the revised 5,432,000 who were hired or rehired in June, as the hiring rate as a percentage of all employed rose from 3.7% in June to 3.8% in July, which was also up from 3.7% in July a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations rose by 23,000, from 5,309,000 in June to 5,332,000 in July, while the separations rate as a percentage of the employed was unchanged at 3.6%, which was up from the separations rate of 3.5% in July a year ago (see table 3)...subtracting the 5,332,000 total separations from the total hires of 5,501,000 would imply an increase of 169,000 jobs in July, a bit less than the revised payroll job increase of 189,000 for July reported by the August establishment survey last week, but still not an unusual difference and well within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,164,000 of us voluntarily quit our jobs in July, up by 34,000 from the revised 3,130,000 who quit their jobs in June, while the quits rate, widely watched as an indicator of worker confidence, inched up to 2.2% of total employment, from 2.1% in June and from 2.1% a year earlier (see details in table 4)....in addition to those who quit, another 1,783,000 were either laid off, fired or otherwise discharged in July, down by 23,000 from the revised 1,806,000 who were discharged in June, as the discharges rate remained unchanged at 1.2% of all those who were employed during the month, which was up from the discharges rate of 1.1% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 384,000 in July, up from 373,000 in June, for an 'other separations rate’ of 0.3%, which was unchanged from both June and from July 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, September 10, 2017

July’s trade deficit and factory inventories

this week's regular monthly economic releases included the July report on our International Trade, the Full Report on Manufacturers' Shipments, Inventories and Orders for July, and the July report on Wholesale Trade, Sales and Inventories, all from the Census Bureau, and the and the Consumer Credit Report for July from the Fed, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $18.5 billion, or at a 5.9% annual rate, as non-revolving credit expanded at a 6.9% rate to $2,759.3 billion and revolving credit outstanding rose at a 3.2% rate to $994.5 billion...the main privately issued report released this week was the August Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 55.3% in August, up from 53.9% in July, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in August than in July....in addition, in a once a year report, the BLS released the Current Employment Statistics Preliminary Benchmark Revision, which estimated that 95,000 more payroll jobs were created in the year ending March 2017 than had been reported in the monthly Employment Situation reports we review monthly, more than half of which were in construction...however, this preliminary estimate will not yet affect jobs totals as they're being reported the rest of this year; that will not happen until the final benchmark revision is published with the January 2018 employment report in February 2018....

July Trade Deficit Inches Up on Lower Exports of Cars and Consumer Goods

our trade deficit rose by 0.2% in July as the value of both our exports and imports decreased, but our exports decreased a bit more....the Census report on our international trade in goods and services for July indicated that our seasonally adjusted goods and services trade deficit increased by $0.1 billion to $43.7 billion in July from a revised June deficit of $43.6 billion...after rounding, the value of our July exports fell by $0.6 billion to $194.4 billion on a $0.4 billion decrease to $128.6 billion in our exports of goods and a $0.1 billion decrease to $65.8 billion in our exports of services, while our imports fell by $0.4 billion to $238.1 billion on a $0.5 billion decrease to $193.9 billion in our imports of goods while our imports of services rose $0.1 billion to $44.1 billion...export prices were on average 0.4% higher in July, so the relative change in real July exports would be lower than the nominal dollar amount by that percentage, while import prices were 0.1% higher, meaning that relative real imports were smaller than the nominal dollar values reported here by that small percentage...

the decrease in our July exports was due to lower exports of consumer goods and automotive products, which was partially offset by higher exports of capital goods....referencing the Full Release and Tables for July (pdf), in Exhibit 7 we find that our exports of consumer goods fell by $670 million to $15,747 million on a $457 million decrease in our exports of cell phones and a $241 million decrease in our exports of gem diamonds, and that our exports of automotive vehicles, parts, and engines fell by $597 million to $12,967 million on a $986 million decrease in our exports of new and used passenger cars...in addition, our exports of industrial supplies and materials fell by $192 million to $37,525 million on a $597 million decrease in our exports of nonmonetary gold, and our exports of other goods not categorized by end use fell by $286 million to $5,294 million...partially offsetting those decreases, our exports of capital goods rose by $961 million to $44,884 million on an increase of $1,092 million in our exports of civilian aircraft and a $304 million increase in our exports of civilian aircraft engines, while our exports of foods, feeds and beverages rose by $352 million to $12,185 million on a $150 million increase in our exports of soybeans...'

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that lower imports of automobiles and crude oil were responsible for the $0.4 billion drop in our goods imports, because our imports of capital goods rose at the same time...our imports of automotive vehicles, parts and engines fell by $827 million to $29,375 million on a $830 million decrease in our imports of passenger cars, and our imports of industrial supplies and materials fell by $714 million to $40,589 million, as our imports of crude oil fell by $948 million while our imports of iron and steel mill products fell by $336 million...at the same time, our imports of consumer goods fell by $2 million to $48,760 million because our imports of pharmaceuticals fell by $1,097 million, and our imports of other goods not categorized by end use fell by $360 million to $7,942 million.....partially offsetting the decreases in those categories, our imports of capital goods rose by $1272 million to $54,142 million on an increase of $569 million in our imports of computers and a $606 million increase in our imports of computer accessories, and our imports of foods, feeds, and beverages rose by $196 million to $11,651 million on a $101 million increase in our imports of meat...

to gauge the impact of July trade in goods on 3rd quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here....from that table, we can compute that 2nd quarter real exports of goods averaged 125,251 million monthly in 2009 dollars, while inflation adjusted July exports were at 126,385 million in the same 2009 dollar quantity index representation... annualizing the change between the two figures, we find that July's real exports are running at a 3.7% annual rate above those of the 2nd quarter, or at a pace that would add about 0.30 percentage points to 3rd quarter GDP if continued through August and September.....in a similar manner, we find that our 2nd quarter real imports averaged 187,682 million monthly in chained 2009 dollars, while inflation adjusted July imports were at 187,985 million...that would indicate that so far in the 3rd quarter, we have seen a small increase at annual rate of a bit more than 0.6% in our real imports from those of the 2nd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 0.6% rate would subtract about 0.09 percentage points from 3rd quarter GDP....hence, if the July trade deficit is maintained throughout the 3rd quarter, our improving balance of trade in goods over that of the 2nd quarter would add about 0.21 percentage points to the growth of 2nd quarter GDP....note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have easy access to all their price changes...

Factory Shipments Up 0.3% in July, Factory Inventories Up 0.2%

the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $15.8 billion or 3.3 percent to $466.4 billion in July, following a increase of 3.2% in June, which was revised from the 3.0% increase reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the advance report on durable goods we reported on two weeks ago...in that respect, this report showed that new orders for manufactured durable goods decreased by $16.8 billion or 6.8 percent to $228.9 billion, virtually unchanged from the previously published decrease...

more importantly then, this report indicated that the seasonally adjusted value of July factory shipments rose for the seventh time in eight months, increasing by $1.6 billion or 0.3 percent to $474.3 billion, following a 0.1% increase in June...shipments of durable goods were up by $0.6 billion or 0.2 percent to $236.9 billion in July, revised from the previously published $1.0 billion, 0.4% increase, which followed a statistically insignificant decrease in June....meanwhile, the value of shipments (and hence of "new orders") of non-durable goods rose by $1.0 billion or 0.4 percent to $237.4 billion, as a $0.9 billion or 2.2 percent increase to $41.3 billion in the value of shipments of petroleum and coal products accounted for most of the increase...

meanwhile, the aggregate value of July factory inventories rose for the eighth time in the past nine months, increasing by $1.4 billion or 0.2 percent to $651.6 billion, following a 0.3% increase in June....July inventories of durable goods increased in value by $1.3 billion or 0.3 percent to $398.7 billion, virtually unchanged from what was reported in the advance report two weeks ago....at the same time, the value of non-durable goods' inventories increased $0.2 billion or 0.1 percent to $252.8 billion, on a $0.3 billion or 0.8 percent increase to $34.5 billion in the value of coal and petroleum inventories...

to gauge the effect of these July factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories rose by 0.2% to $227,793 million; the value of work in process inventories rose by 0.5% to $201,371 million, and materials and supplies inventories were valued 0.1% higher at $222,396 million...the July producer price index reported that prices for finished goods decreased 0.1%, prices for intermediate processed goods were also 0.1.% lower, while prices for unprocessed goods averaged 0.4% lower....assuming similar valuations for inventories, that would suggest that July's real finished goods inventories were roughly 0.3% higher, real inventories of intermediate processed goods were 0.6% higher, and real raw material inventory inventories were 0.5% higher, all following a second quarter that saw total inventories virtually unchanged.. 

 

(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, September 3, 2017

August’s jobs report; 2nd quarter GDP revision; July’s income and outlays and construction spending

what are probably the three most important monthly economic releases were released on successive days this week; the 2nd estimate of 2nd quarter GDP from the Bureau of Economic Analysis was released on Wednesday, followed by the July report on Personal Income and Spending, also from the BEA, on Thursday, and then the Employment Situation Summary for August from the Bureau of Labor Statistics on Friday...Friday also saw the release of the July report on Construction Spending (pdf) from the  Census Bureau, while earlier in the week saw the release of the Dallas Fed Texas Manufacturing Outlook Survey for August, which indicated its general business activity index was unchanged at 17.0 in August, indicating an ongoing robust manufacturing expansion supporting the energy focused Texas economy...

the week’s privately issued reports included the ADP Employment Report for August; the light vehicle sales report for August from Wards Automotive, which estimated that vehicles sold at a 16.03 million annual rate in August, down 4.0% from the 16.69 million annual rate in July, and down 6% from the 16.9 million annual rate in August a year ago; the Case-Shiller Home Price Index for June, which is an average of April, May and June relative home prices, and which reported that home prices nationally for those 3 months averaged 5.8% higher than prices for the same homes that sold during the same 3 month period a year earlier; and the widely followed August Manufacturing Report On Business from the Institute for Supply Management (ISM), which reported that their manufacturing PMI (Purchasing Managers Index) rose to 58.8% in August, up from 56.3% in July, and the highest index reading since April 2011...

Employers Add 156,000 Jobs in August; Employment Rate Falls

the Employment Situation Summary for August reported weak job creation and a drop in the average workweek, while the unemployment rate rose and the employment rate fell…estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 156,000 jobs in August, after the payroll job increase for July was revised down from 209,000 to 189,000, and the payroll jobs increase for June was revised down from 231,000 to 210,000…that means that this report represents a total of just 115,000 more seasonally adjusted payroll jobs than were reported last month, not even enough to keep up with the increase in the working age population...the unadjusted data shows that there were actually 211,000 more payroll jobs in August, after July had seen an end of the school year related decrease of 1,091,000, so seasonal adjustments had a relatively small impact on this month's headline count...

seasonally adjusted job increases were spread throughout the private goods producing and service sectors, with only the information and government sectors seeing notable losses of 8,000 and 9.000 jobs respectively....the manufacturing sector added a seasonally adjusted 36,000 jobs, with the addition of 13,700 more jobs in the manufacturing of vehicles and parts....employment in construction increased by 28,000, with 15,400 of those jobs working for residential specialty trade contractors....the broad professional and business services category added 40,000 jobs, as 8,000 more were added in computer systems design and 7,000 more workers found work with employment services....employment in health care rose by 20,200, with the addition of 7,500 jobs in doctor's offices and 6,400 in hospitals...meanwhile, the other major sectors, including mining and logging, wholesale and retail sales, transportation and warehousing, financial activities, private education and  leisure and hospitality, all saw increases of less than 10,000 in payroll employment over the month...'

the establishment survey also showed that average hourly pay for all employees rose by 3 cents an hour to $26.39 an hour, after it had increased by 9 cents an hour in July; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $22.12 an hour, after July's pay figure was revised 2 cents lower....employers also reported that the average workweek for all private payroll employees decreased by 0.1 hour to 34.4 hours in August, while hours for production and non-supervisory personnel remained at 33.7 hours for the fifth consecutive month...meanwhile, the manufacturing workweek fell by 0.2 hours to 40.7 hours, while average factory overtime was unchanged at 3.3 hours...

at the same time, the seasonally adjusted extrapolation from the August household survey indicated that the number of those who reported being employed fell by an estimated 74,000 to 153,439,000, while the similarly estimated number of those unemployed rose by 151,000 to 7,132,000; which together meant that August saw a net increase of 77,000 in the total labor force...since the working age population had grown by 206,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 128,000 (rounded) to 94,785,000, which was nonetheless not enough to change the labor force participation rate, as it remained at 62.9%....at the same time, the drop in number employed vis-a-vis the increase in the population was great enough to decrease the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.1%...in addition, the increase in count of those unemployed as a percentage of the labor force was enough to increase the unemployment rate from 4.3% to 4.4%.....at the same time, there was also a small decrease of 27,000 in those who reported they were forced to accept just part time work, from 5,282,000 in July to 5,255,000 in August, which thus left the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", unchanged at 8.6% of the labor force in August....

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..

2nd Quarter GDP Revised to Indicate Growth at a 3.0% Rate

the Second Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 3.0% rate in the quarter, revised down from the 2.6% growth rate reported in the advance estimate last month, as growth in personal consumption expenditures and all types of investment was greater than previously estimated, offsetting smaller downward revisions to exports and to state & local government outlays.....in current dollars, our second quarter GDP grew at a 4.0% annual rate, increasing from what would work out to be a $19,057.7 billion a year rate in the 1st quarter to a $19,246.7 billion annual rate in the 2nd quarter of this year, with the headline 3.0% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 1.0%, aka the GDP deflator, was applied to the current dollar change...

remember that the GDP release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 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 2nd estimate of 2nd quarter GDP, which is linked to on the sidebar of the BEA press release...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2012; table 2, which shows the contribution of each of the components to the GDP figures for those months 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 components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...the pdf for the 2nd quarter advance estimate, which this estimate revises, is here...

growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 2.8% growth rate reported last month to a 3.3% growth rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 3.6% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation grew at a 0.3% annual rate in the 2nd quarter, which was unrevised from the PCE inflation rate reported a month ago...real consumption of durable goods grew at a 8.9% annual rate, which was revised from the 6.3% growth rate shown in the advance report, and added 0.65 percentage points to GDP, as an increase in real consumption of recreational goods and vehicles at a 14.0% rate accounted for more than half the durables increase....real consumption of nondurable goods by individuals rose at a 4.3% annual rate, revised from the 3.8% increase rate reported in the 1st estimate, and added 0.62 percentage points to 2nd quarter economic growth, as growth in clothing consumption at a 10.6% annual rate led the non-durables growth ….at the same time, consumption of services grew at a 2.1% annual rate, revised from the 1.9% growth rate reported last month, and added 1.00 percentage points to the final GDP tally, led by 3.5% growth in real consumption of housing and utilities...

meanwhile, seasonally adjusted real gross private domestic investment grew at a 3.6% annual rate in the 2nd quarter, revised from the 2.0% growth estimate reported last month, as real private fixed investment grew at a 3.6% rate, rather than at the 2.2% rate reported in the advance estimate, while the previously reported contraction in inventory growth was reversed to show real inventory growth....real investment in non-residential structures was revised from growth at a 4.9% rate to growth at a 6.2% rate, while real investment in equipment was revised to show growth at a 8.8% rate, up from the 8.2% growth rate previously reported...at the same time, the quarter's investment in intellectual property products was revised from growth at a 1.4% rate to growth at a 4.9% rate, while the contraction rate of residential investment was revised from -6.8% to -6.5% annually…after those revisions, the increase in investment in non-residential structures added 0.18 percentage points to the 2nd quarter's growth rate, the increase in investment in equipment added 0.47 percentage points to the quarter's growth, greater investment in intellectual property added 0.20 percentage points, while the decrease in investment in residential structures subtracted 0.26 percentage points from the 2nd quarter's GDP...

at the same time, investment in real private inventories grew by an inflation adjusted $1.8 billion in the 2nd quarter, revised from the originally reported inventory shrinkage of $0.3 billion...this came after inventories had grown at an inflation adjusted $1.2 billion rate in the 1st quarter, and hence the $0.6 billion increase in real inventory growth added 0.02 percentage points to the quarter's growth rate, in contrast to the 0.02 percentage point subtraction due to slower inventory growth that was shown in the advance estimate....since growth in inventories indicates that more of the goods produced during the quarter were left "sitting on the shelf”, their increase by $0.6 billion meant that real final sales of GDP were relatively smaller by that much, but not enough to statistically change the growth rate in real final sales of GDP, which was also revised from 2.6% to 3.0%..

the previously reported increase in real exports was revised smaller with this estimate, while at the same time the reported increase in real imports was revised lower by a similar amount, and as a result the net impact of our foreign trade little changed from what was previously reported...our real exports grew at a 3.7% rate rather than the 4.1% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their growth added 0.45 percentage points to the 2nd quarter's growth rate, a bit less than the 0.48 percentage point addition shown in the previous report....meanwhile, the previously reported 2.1% increase in our real imports was revised to a 1.6% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their increase subtracted 0.23 percentage points from 2nd quarter GDP....thus, our improving trade balance added a net 0.21 percentage points to 2nd quarter GDP, rather than the 0.18% percentage point addition that had been indicated by the advance estimate…

finally, there were negative revisions to real government consumption and investment in this 2nd estimate, as the entire government sector shrunk at a 0.3% rate, revised from the 0.7% growth rate previously reported...real federal government consumption and investment was seen to have grown at a 1.9% rate from the 1st quarter in this estimate, which was revised from the 2.3% growth rate in the 1st estimate...real federal outlays for defense were revised to show growth at a 4.7% rate, rather than the 5.2% growth rate previously reported, and added 0.18% percentage points to 2nd quarter GDP, while all other federal consumption and investment shrunk at a 1.9% rate, same as was previously reported, and subtracted 0.05% percentage points from 2nd quarter GDP...meanwhile, real state and local consumption and investment shrunk at a 1.7% rate in the quarter, which was revised from the 0.2% contraction rate reported in the 1st estimate, and subtracted 0.18% percentage points from 2nd quarter GDP....note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, thus indicating an increase in the output of those goods or services...

July Personal Incomes Up 0.4%, Personal Spending Up 0.3%, PCE Price Index Up 0.1%

other than the employment report and the GDP report itself, the monthly report on Personal Income and Outlays from the Bureau of Economic Analysis is probably the most important regular economic release we see monthly, as each monthly report on personal consumption expenditures (PCE) accounts for roughly 23% of its quarter's GDP by itself...in addition, this report also includes the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated, monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those are not the current monthly change; rather, they're seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase for a year if July’s adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from June to July..

thus, when the opening line of the press release for the July report tell us "Personal income increased $65.6 billion (0.4 percent) in July", they mean that the annualized figure for seasonally adjusted personal income in July, $16,450.3 billion, was $65.6 billion, or a bit less than 0.4% greater than the annualized personal income figure of $16,384.7 billion extrapolated for June; the actual, unadjusted change in personal income from June to July, which is an order of magnitude lower,  is not given...at the same time, annualized disposable personal income, which is income after taxes, rose by less than 0.3%, from an annual rate of $14,370.8 billion in June to an annual rate of $14,410.4 billion in July....the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in July, the largest contributors to the $65.6 billion annual rate of increase in personal income were a $41.4 billion increase in wages and salaries and a $13.5 billion increase in dividend and interest income…

for the personal consumption expenditures (PCE) that will be included in 3rd quarter GDP, BEA reports that they increased at a $44.7 billion rate, or by a bit more than 0.3% from June, as the annual rate of PCE rose from $13,338.6 billion in June to $13,383.3 billion in July....June PCE was revised from $13,304.7 billion annually to $13,338.6 billion, while PCE for the months going back to April were also revised as well, all of which were already included in the upward revision in the 2nd estimate of 2nd quarter GDP which we reviewed earlier (data in this report, although released a business day later than the GDP release, is concurrent with GDP data)....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $45.2 billion to $13,900.3 billion annually in July, which left total personal savings, which is disposable personal income less total outlays, at a $510.2 billion annual rate in July, down from the revised $515.7 billion in annualized personal savings in June... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, slipped to 3.5% in July from the June savings rate of 3.6%...

as you know, before personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....that's done with the price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, which is included in Table 9 in the pdf for this report...that index rose from 112.285 in June to 112.384 in July, a month over month inflation rate that's statistically 0.088%, which BEA reports as an increase of 0.1 percent, following the statistically unchanged PCE price index reported for June...note that when the PCE price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in our familiar chained 2009 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....that result is shown in table 7 of the PDF, where we see that July's chained dollar consumption total works out to 11,909.1 billion annually, 0.2458% more than June's 11,879.9 billion, a difference that the BEA reports as +0.2%...

however, to estimate the impact of the change in PCE on the change in GDP, the month over month change doesn't help us much, since GDP is reported quarterly....thus we have to compare July's real PCE to the the real PCE of the 3 months of the second quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the quarterly annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 2nd quarter was represented by 11,854.4 billion in chained 2009 dollars..(ie, that's the same as is shown in table 3 of the pdf for the 2nd quarter GDP report)....when we compare July's adjusted PCE of 11,909.1 to the 2nd quarter real PCE of 11,854.4, we find that July real PCE has grown at a 1.86% annual rate compared to the 2nd quarter....this means that even if July’s real PCE growth does not improve during August and September, growth in PCE would still add 1.28 percentage points to the growth rate of the 3rd quarter...

Construction Spending Fell 0.6% in July after Prior Months Were Revised Much Higher

the Census Bureau report on construction spending for July (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,211.5 billion annually if extrapolated over an entire year, which was 0.6 percent (±1.5 percent)* below the revised annualized estimate of $1,219.2 billion of construction spending in June but still 1.8 percent (±1.8 percent)* above the estimated annualized level of construction spending in July of last year...the June construction spending estimate was revised 1.1% higher, from $1,205.8 billion to $1,221.6 billion, while the annual rate of construction spending for May was revised more than 1.2% higher, from $1,221.6 billion to $1,236.7 billion....together, those revisions would suggest an upward revision of 0.26 percentage points to 2nd quarter GDP when the third estimate is released at the end of September...

quoting further details from the Census release: "Spending on private construction was at a seasonally adjusted annual rate of $945.5 billion, 0.4 percent (±1.0 percent)* below the revised June estimate of $949.4 billion. Residential construction was at a seasonally adjusted annual rate of $517.5 billion in July, 0.8 percent (±1.3 percent)* above the revised June estimate of $513.2 billion. Nonresidential construction was at a seasonally adjusted annual rate of $428.0 billion in July, 1.9 percent (± 1.0 percent) below the revised June estimate of $436.2 billion.In July, the estimated seasonally adjusted annual rate of public construction spending was $266.0 billion, 1.4 percent (±2.6 percent)* below the revised June estimate of $269.8 billion. Educational construction was at a seasonally adjusted annual rate of $66.2 billion, 4.4 percent (±3.9 percent) below the revised June estimate of $69.2 billion. Highway construction was at a seasonally adjusted annual rate of $84.8 billion, 0.1 percent (±6.9 percent)* above the revised June estimate of $84.7 billion"

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of July spending reported in this release on 3rd quarter GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP must be adjusted for changes in price, and the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for each of the various components of non-residential investment....in lieu of trying to adjust for all of those indices, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment...

that index showed that aggregate construction costs were up 1.2% in July, after rising 0.2% in and June and 0.1% from April to May...on that basis, we can estimate that July construction costs were roughly 1.4% more than those of May and 1.5% more  than those of April...we then use those percentages to inflate lower priced spending figures for each of those months, which is arithmetically the same as deflating July construction spending, for comparison purposes...annualized construction spending in millions of dollars for the second quarter is given as 1,219,237 for June, 1,236,722 for May, and 1,217,658 for April, while it was at 1,211,508 for July ...thus to compare July's inflation adjusted construction spending to that of the first quarter, our formula becomes: 1,211,508 / (((1,219,237 * 1.012)+ ( 1,236,722 * 1.014) + (1,217,658 * 1.015)) /3) = 0.976, meaning real construction spending in July was down 2.4% vis a vis the 2nd quarter, or down at a 9.2% annual rate...to figure the effect of that change on GDP,  we annualize the difference between the second quarter average and July and take the result as a fraction of 2nd quarter GDP, and find that July construction spending is falling at a rate that would subtract nearly a full percentage point from 3rd quarter GDP should we see no improvement in August or September…

 

(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, August 27, 2017

July's durable goods, new and existing home sales

the week's widely watched releases included the July advance report on durable goods and the July report on new home sales, both from the Census bureau, and the Existing Home Sales Report for July from the National Association of Realtors (NAR)...the week also saw the release of the Chicago Fed National Activity Index (CFNAI) for July, a weighted composite index of 85 different economic metrics, which fell to -0.01 in July, down from +0.16  in June...after revisions of the index for 4 out of the last 5 months, the 3 month average of the index was at –0.05, down from +0.09 in June, which indicates national economic activity has been slightly below the historical trend over those recent months...in addition, this week saw the release of two more regional Fed manufacturing surveys for August: 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 was unchanged at +14 in August, suggesting an ongoing modest expansion of that region's manufacturing; and the Kansas City Fed manufacturing survey for July, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to +16 in July from +10 in July and +11 in June, also suggesting an ongoing expansion in that region's manufacturing..

July Durable Goods: New Orders Down 6.8%, Shipments Up 0.4%, Inventories Up 0.3%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for July (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods fell by $16.7 billion or 6.8 percent to $229.2 billion in July, the largest drop since August 2014, following a revised increase of 6.4% to $245.9 billion in June new orders, which had been originally reported as a 6.5% increase to $245.6 billion...with upward revisions to prior months, year to date new orders are still running 5.0% above those of 2015, the same year over year change we saw in this report last month...as is usually the case, the volatile monthly change in new orders for transportation equipment drove the July headline change, as those transportation equipment orders fell $17.4 billion or 19.0% to $74.3 billion, on a 70.7% decrease to $7,373 million in new orders for commercial aircraft....excluding new orders for transportation equipment, other new orders were up 0.5% in July, as new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, rose 0.4% to $63,784 million...

the seasonally adjusted value of July's shipments of durable goods, which will be inputs into various components of 3rd quarter GDP after adjusting for changes in prices, rose by $1.0 billion or 0.4 percent to $237.4 billion, after June shipments were little changed from those of May....a 0.5% increase in shipments of transportation equipment underpinned the July change, as they rose $0.4 billion to $79.2 billion... meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the twelfth in thirteen months, increasing by $1.3 billion or 0.3 percent to $398.8 billion, after the change in June inventories was revised from a 0.4% increase to a 0.5% increase...an increase in inventories of transportation equipment were a factor in the inventory increase, as they rose $0.6 billion or 0.5 percent to $129.6 billion, on a 3.4% increase to $13,149 million in inventories of defense aircraft and a 1.2% increase to $34,742 million in inventories of motor vehicles...excluding the increase in inventories of transportation equipment, all other durable goods inventories still increased 0.3% to $269,207 million...

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, fell for the second time in three months, declining by $3.8 billion or 0.3 percent to $1,131.8 billion, following a June increase of 1.3% that was was revised a bit lower but was statistically unchanged.....unsurprisingly, a $4.8 billion or 0.6 percent decrease to $772.2 billion in unfilled orders for transportation equipment was responsible for the decrease, as unfilled orders excluding transportation equipment were up 0.3% to $359,617 million....compared to a year earlier, the unfilled order book for durable goods is now 0.7% above the level of last July, even as unfilled orders for transportation equipment are 0.7% below their year ago level, largely on a 1.7% decrease in the backlog of orders for commercial aircraft...   

New Home Sales Seemed to be Slowing in July

the Census report on New Residential Sales for July (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 571,000 new homes a year, which was 9.4 percent (±12.9 percent)* below the revised June rate of 630,000 new single family home sales a year and  8.9 percent (±15.4 percent)* below the estimated annual rate that new homes were selling at in July of last year....the asterisk indicates that based on their small sampling, Census could not be certain whether July new home sales rose or fell from those of June, 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....hence, these initial new home sales reports are not very reliable and often see significant revisions...with this report; sales new single family homes in June were revised from the annual rate of 610,000 reported last month to a 630,000 a year rate, and home sales in May, initially reported at an annual rate of 610,000 and revised down to a 605,000 a year rate last month, were revised up to a 618,000 annual rate with this report, while April's annualized home sales rate, initially reported at 569,000 and revised from 593,000 to 577,000 last month, were also revised back up to a 590,000 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 showed that approximately 49,000 new single family homes sold in July, down from the 58,000 new homes that sold in June and the 59,000 that sold in May....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in July was $313,700, up from the median sale price of $311,600 in June and up from the median of $295,000 in July a year ago, while the average July new home sales price was $371,200 , up from $370,000 average sales price in June, and up from the average sales price of $355,000 in July a year ago....a seasonally adjusted estimate of 276,000 new single family houses remained for sale at the end of July, which represents a 5.8 month supply at the July sales rate, up from the reported 5.4 month supply in June....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales decrease to 571,000 Annual Rate in July and A few Comments on June New Home Sales...

Existing Home Sales Down 1.3% in July

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell 1.3% from June to July, projecting that 5.44 million homes would sell over an entire year if the July home sales pace were extrapolated over that year, a pace that was still 2.1% above the annual sales rate projected in July of a year ago….at the same time, June home sales at a 5.51 million annual rate were revised down from the 5.52 million rate shown in last month's report...the NAR also reported that the median sales price for all existing-home types was $258,300 in July, 6.2% higher than in July a year earlier, which they report as "the 65th consecutive monthly year over year increase in home prices".....the NAR press release, which is titled "Existing-Home Sales Slide 1.3 Percent in July", 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…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 513,000 homes sold in July, down by 14.5% from the 600,000 homes that sold in June, and unchanged from the estimated 513,000 homes that sold in July of last year, so we can see there was a sizable seasonal adjustment just to bring the annualized published figures up to the level reported...that same pdf indicates that the median home selling price for all housing types fell 1.9%, from a revised $263,300 in June to $258,300 in July, while the average home sales price was $298,800, down 1.5% from the $303,500 average selling price in June, but up 4.9% from the $284,900 average home sales price of July a year ago, with the regional average home sales prices ranging from a low of $237,000 in the Midwest to a high of $393,400 in the West...for additional commentary with long term graphs on this report, see "NAR: "Existing-Home Sales Slide 1.3 Percent in July"" and "A Few Comments on June Existing Home Sales" from Bill McBride at Calculated Risk...

 

(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, August 20, 2017

July’s retail sales, industrial production, and new home construction; June’s business inventories

the past week's key reports were the Retail Sales for July and Business Sales and Inventories for June, both from the Census bureau, the July report on Industrial Production and Capacity Utilization from the Fed, and the July report on New Residential Construction from the Census Bureau...other reports released this week included Regional and State Employment and Unemployment for July from the BLS, and the first two regional Fed manufacturing surveys for August: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from +9.8 in July to +25.2 in August, its highest reading in three years, suggesting a broad based expansion of First District manufacturing, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions slipped from +19.5 in July to +18.9 in August, also still suggesting ongoing growth of that region's manufacturing industries...

July Retail Sales Up 0.6% After May and June Sales Revised Higher

seasonally adjusted retail sales were 0.6% higher in July after retail sales for May and June were revised higher....the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $478.9 billion during  the month, which was 0.6 percent (± 0.5 percent) than June's revised sales of $476.0 billion and 4.2 percent (± 0.9 percent) above the adjusted sales in July of last year...June's seasonally adjusted sales were revised from the $473.5 billion originally reported to $476.0 billion, while May sales were revised from $474.2 billion to $474.76 billion with this release....estimated unadjusted sales, extrapolated from a survey of a small sampling of retailers, indicated sales actually fell 0.8%, from $463,844 million in June to $479,912 million in July, while they were up 3.6% from the $463,245 million of sales in July a year ago...revisions to May and June indicate that 2nd quarter sales were roughly $3.1 billion higher than previously reported, which would add about $12.3 billion to the BEA's calculation of personal consumption expenditures at an annual rate, which should be enough to lift 2nd quarter GDP by 0.07 percentage points when the 2nd estimate is published at the end of the month…

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the July Census pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the May to June change under "May 17 (r)evised" and the revised June 2016 to June 2017 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance June sale estimates, before this month's revision, is here....

July 2017 retail sales table

clearly, July's retail sales were boosted by the 1.2% increase to $100,076 million in seasonally adjusted sales at vehicle and parts dealers, but even without that increase, other retail sales still rose 0.5%...and that too is stronger than it appears, because prices for all goods less food and energy goods were down 0.1% in July, which means that these dollar sales bought 0.1% more merchandise, which thus means that much more merchandise was produced or imported...particularly noteworthy is the boost that 3rd quarter GDP will get from automobile sales, as prices for new cars fell 0.7% and prices for used cars and trucks fell 0.5%, which means real PCE of vehicles was up by nearly 2.0% in July, which will work out to an 8% annual rate for GDP purposes even if vehicle sales remain flat for the rest of the quarter...

Industrial Production Up 0.2% in July After Prior Months Revised Modestly Higher

the Fed's G17 release on Industrial production and Capacity Utilization for July indicated that industrial production rose by 0.2% in July after rising by 0.4% in June and being unchanged in May...industrial production is now up 2.2% from a year ago, as compared to last month's year over year increase of 2.0%...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 105.5 in July from 105.3 in June, which was revised from the 105.2 reported for June a month ago...at the same time, the May reading for the index was revised up from 104.8 to 104.9, the April reading for the index was revised up 104.7 to 104.9, and the March index reading was revised from 103.8 to 103.9...

the manufacturing index, which accounts for more than 77% of the total IP index, was unchanged at 103.4 in July, after June's manufacturing index was revised up from 103.3, May's manufacturing index was revised from 103.1 to 103.2, April's manufacturing index was revised from 103.5 to 103.8, and the manufacturing index March was revised up from 102.5 to 102.6.... meanwhile, the mining index, which includes oil and gas well drilling, rose from 110.4 in June to 111.0 in July, after the June mining index was revised down from the previously reported 111.0...nonetheless, the mining index still remains 10.2% higher than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 1.6% to 104.7 in July after falling a revised 1.2% in June, and still remains 0.6% below its year ago reading of 104.1..

this report also includes capacity utilization figures, which are 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 was unchanged at 76.7% in July, after capacity utilization for June was revised from 76.6% to 76.7%, and after capacity utilization of each of the three prior months was revised up by 0.1% from previously reported levels....capacity utilization by NAICS durable goods production facilities, however, fell from 74.6 in June to 74.4 in July, as capacity utilization of motor vehicles and parts manufacturers fell from 80.7% to 77.8%, while capacity utilization for non-durables producers rose from 77.4% to 77.7% at the same time....capacity utilization for the mining sector rose to 84.6% in July, up from 84.4% in June, which was originally reported as 84.8%, while utilities were operating at 78.1% of capacity during July, up from their 76.9% of capacity during June, a figure that was originally reported at 74.6%...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....

June Business Inventories Up 0.5%, More than Estimated by the BEA

following the release of the July retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for June (pdf), which incorporates the revised June retail data from that July retail report and the earlier published 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 $1,356.8 billion in June, up 0.3 percent (±0.2%) from May revised sales, and up 4.3 percent (±0.4 percent) from June sales of a year earlier...note that total May sales were revised from the originally reported $1,350.2 billion to $1,353.3 billion, now up 0.1% from April....manufacturer's sales were down 0.2% to $471,535 million in June, while retail trade sales, which exclude restaurant & bar sales from the revised June retail sales reported earlier, rose 0.3% to $419,438 million, and wholesale sales rose 0.7% to $465,800 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,869.3 billion at the end of June, up 0.5 percent (±0.1%) from May, and 2.8 percent (±0.2%)* higher than in June a year earlier...the value of end of May inventories was revised up slightly from the $1,859.7 billion reported last month to $1,860.4 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $649,086 million, 0.2% higher than those of May, inventories of retailers were valued at $620,809 million, 0.6% more than in May, while inventories of wholesalers were estimated to be valued at $599,389 million at the end of June, up 0.7% from May...

New Housing Starts, Permits, Reportedly Lower in July

the July report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in July was at a seasonally adjusted annual rate of 1,155,000, which was 4.8 percent (±10.2 percent)* below the revised June estimated annual rate of 1,213,000 housing units started, and was also 5.6 percent (±8.5 percent)* below last July's pace of 1,223,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, July's housing starts could have been up by 5.4% or down by as much as 16.0% from those of June, with even larger revisions possible...in this report, the annual rate for June housing starts was revised from the 1,215,000 reported last month to 1,213,000, while May starts, which were first reported at a 1,092,000 annual rate, were revised up from last month's initial revised figure of 1,122,000 annually to an annual rate of 1,129,000 with this report....those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 109,000 housing units were started in July, down from the 116,300 units started in June...of those housing units started in July, an estimated  81,100 were single family homes and 26,700 were units in structures with more than 5 units, down from the revised 84,100 single family starts in June, and down from the 31,600 units started in structures with more than 5 units in June...

as we've pointed out previously, 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 July, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,223,000 housing units per year, which was 4.1 percent (±0.9 percent) below the revised June rate of 1,275,000 permits, but was 4.1 percent (±1.8 percent) above the rate of building permit issuance in July a year earlier...the annual rate for housing permits issued in June was revised from 1,254,000 to 1,275,000 ....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 100,400 housing units were issued in July, down from the revised estimate of 127,900 new permits issued in June...the July permits included 61,800 permits for single family homes, down from 74,700 single family permits in June, and 28,500 permits for housing units in apartment buildings with 5 or more units, down from 42,500 such multifamily permits a month earlier... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.155 Million Annual Rate in July and Comments on July 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…)