Sunday, December 10, 2017

November’s jobs report; October’s trade deficit, factory inventories and wholesale sales

in addition to the Employment Situation Summary for November from the Bureau of Labor Statistics, this week's releases included three reports that will feed into 4th quarter GDP: the Census report on our International Trade for October, the Full Report on Manufacturers' Shipments, Inventories and Orders for October, and the October report on Wholesale Trade, Sales and Inventories, also from the Census Bureau...in addition, the Fed released the Consumer Credit Report for October from the Fed, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $20.5 billion, or at a 6.5% annual rate, as non-revolving credit expanded at a 5.6% rate to $2,790.7 billion and revolving credit outstanding rose at a 9.9% rate to $1,011.5 billion...

privately issued reports released this week included the November Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 57.4%, down from 60.1% in October, indicating a somewhat smaller plurality of service industry purchasing managers reported expansion in various facets of their business in November, and the Mortgage Monitor for October (pdf) Black Knight Financial Services, which indicated that 4.44% of all mortgages were delinquent in October, up from 4.40% in September and up from 4.35% in October of 2016, and that 0.68% of all mortgages were in the foreclosure process, down from from 0.70% in September and down from 0.99% a year ago....mortgage delinquencies continue to be elevated in regions of the country where properties have experienced hurricane damage...

Employers Add 228,000 Jobs, Unemployment Rate and Labor Force Participation Unchanged

the Employment Situation Summary for November reported better than average job creation, while the employment rate fell even as the unemployment rate was unchanged…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 228,000 jobs in November, after the previously estimated payroll job increase for September was revised up from up from 18,000 to 38,000, while the payroll jobs increase for October was revised down from 261,000 to 244,000…that means that this report represents a total of 232,000 more seasonally adjusted payroll jobs than were reported last month, about 50,000 more than the average of the past 12 months...the unadjusted data, meawhile, shows that there were actually 532,000 more payroll jobs extent than in October, 451,600 of which were seasonal jobs added in the retail sector...

seasonally adjusted job increases in November were spread throughout the private goods producing and service sectors and in government, with the 4,000 jobs lost in the information sector the only notable decrease...the largest job increase was seen in the broad professional and business services sector, which added 46,000 jobs, with 18,300 of those working for temporary employment services...the health care and social assistance sector saw the addition of 33,500 jobs, with the addition of 6,800 jobs in doctor's offices and 6,900 jobs in home health care services...another 31,000 jobs were added in manufacturing, with 8,300 of those employed in the manufacture of machinery...in addition, 19,000 jobs were added in construction, with 11,900 of those working for nonresidential specialty trade contractors....then, after the seasonal adjustment, retail sales added 18,700 workers, with 6,800 of those working in general merchandise stores, and another 14,000 were employed in the leisure and hospitality sector, with the addition of 18,900 jobs in bars and restaurants...meanwhile, other sectors including mining, wholesale trade, transportation and warehousing, financial activities, private education and government, all saw smaller job gains over the month..

the establishment survey also showed that average hourly pay for all employees rose by 5 cents an hour to $26.55 an hour in November, after it had decreased by a revised 3 cents an hour in October; at the same time, the average hourly earnings of production and non-supervisory employees also increased by 5 cents to $22.24 an hour...employers also reported that the average workweek for all private payroll employees increased by a tenth of an hour to 34.5 hours in November, while weekly hours for production and non-supervisory personnel was unchanged at 33.7 hours...at the same time, the manufacturing workweek was unchanged at 40.9 hours, while average factory overtime was unchanged at 3.5 hours...

meanwhile, the November household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 57,000 to 153,918,000, while the estimated number of those unemployed and looking for work rose by 90,000 to 6,610,000; and hence the total labor force increased by a rounded total of 148,000....since the working age population had grown by 183,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 35,000 to a record high of 95,420,000, which was still not enough to statistically change the labor force participation rate, which remained at 62.7% in November....meanwhile, the increase in number employed as a percentage of the increase in the population was small enough to lower the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.1%...on the other hand, the increase in the number unemployed was not enough to change the unemployment rate, which remained at 4.1%...meanwhile, the number of those who reported they were forced to accept just part time work rose by 48,000, from 4,753,000 in October to 4,801,000 in November, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.9% of the labor force in October to 8.0% in November...

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..

October Trade Deficit Up 8.6%, Revisions to 3rd Quarter Trade are a Big Hit to GDP

our trade deficit rose by 8.6% in October as the value of our exports slipped a bit while the value of our imports increased....the Census report on our international trade in goods and services for October indicated that our seasonally adjusted goods and services trade deficit rose by $3.8 billion to $48.7 billion in October from a revised September deficit of $44.9 billion...the value of our October exports fell by less than $0.1 billion to $195.9 billion on a $0.3 billion decrease to $130.3 billion in our exports of goods and a $0.3 billion increase to $65.6 billion in our exports of services, while our imports rose $3.8 billion to $244.6 billion on a $3.5 billion increase to $199.4 billion in our imports of goods and a $0.3 billion increase to $45.2 billion in our imports of services...export prices were on average unchanged in October, so the relative real decrease in October exports is close to the nominal decrease, while import prices were 0.2% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage...

major changes in October's exports of goods included:

  • Foods, feeds, and beverages exports decreased $1.3 billion as soybean exports decreased $1.4 billion.
  • Capital goods exports decreased $1.2 billion as civilian aircraft exports decreased $1.1 billion.
  • Industrial supplies and materials increased $2.6 billion on increased exports of fuel oil, crude oil, natual gas liquids and other petroleum products.

major changes in October's imports of goods included:

  • Industrial supplies and materials imports increased $1.8 billion on a $1.5 billion increase in crude oil imports
  • Consumer goods imports increased by $0.8 billion led by a $0.3 billion increase in imports of cell phones
  • Imports of other goods not categorized by end use increased by $1.1 billion.

further details from the press release indicate that  "October figures show surpluses, in billions of dollars, with South and Central America ($3.9), Hong Kong ($2.3), Brazil ($1.1), Singapore ($0.7), Saudi Arabia ($0.3), and United Kingdom ($0.2).  Deficits were recorded, in billions of dollars, with China ($31.9), European Union ($12.0), Mexico ($6.0), Japan ($5.9), Germany ($5.3), Italy ($2.7), South Korea ($2.7), India ($2.1), Canada ($1.9), OPEC ($1.6), France ($1.6), and Taiwan ($1.6).

note that with this release, data for exports and imports of goods and services going back to April have been revised, which means previously published GDP figures for the 2nd and 3rd quarter will also have to be revised...while the new 2nd quarter trade data for 2017 will not be incorporated into GDP figures until the annual revision to GDP is undertaken with the 2nd quarter 2018 release at the end of July 2018, revisions to 3rd quarter trade will be included with the 3rd estimate of 3rd quarter GDP, which will be released later this month...the revisions are rather significant, especially to services; for instance, September exports of services were revised down $0.9 billion, while September imports of services revised up $0.6 billion; as result, the September trade deficit was at $44.9 billion, revised from the $43.5 billion reported last month...in like manner, the August trade deficit was revised higher, from the revised deficit of $42.8 billion reported last month to $44.3 billion, and the July trade deficit was revised from the $43.6 billion reported last month to $45.2 billion...hence, the total $4.5 billion upward revision in the trade deficit for the 3rd quarter months would work out to a decrease to third quarter GDP at a rate in excess of $18 billion annually...that means that revisions to trade included with this release will have the effect of subtracting 0.40 percentage points or more from previously published 3rd quarter GDP figures...

to gauge the impact of October trade on 4th quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the only difference being that they are not annualized here....from that table, we can estimate that revised 3rd quarter real exports of goods averaged 125,674.3 million monthly in chained 2009 dollars, while inflation adjusted October exports were at 125,658 million in the same 2009 dollar quantity index representation... annualizing the change between the two figures, we find that October's real exports of goods are running at a 0.05% annual rate below those of the 3rd quarter, a change that would not have a statistically significant impact on 4th quarter GDP even if continued through November and December....at the same time,  however, we find that our 3rd quarter real imports of goods averaged 187,706.3 million monthly in chained 2009 dollars, while inflation adjusted October goods imports were at 190,978 million...that would indicate that so far in the 4th quarter, we have seen our real imports of goods increase at annual rate of 7.16% over those of the 3rd 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 7.16% rate would subtract about 0.88 percentage points from 4th quarter GDP....hence, if the October trade deficit is maintained at the same level throughout the 4th quarter, our deteriorating balance of trade in goods would subtract about 0.88 percentage points from the growth of 4th quarter GDP....note that we have not estimated the impact of the usually 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...  

October Factory Shipments Up 0.4%, Inventories 0.2% Higher

the Census Bureau's summary of the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for October, which includes revisions to the November 22nd advance durable goods report, is quite complete, so we'll just quote directly from it here:

  • New orders for manufactured goods in October, down following two consecutive monthly increases, decreased $0.3 billion or 0.1 percent to $479.6 billion, the U.S. Census Bureau reported today. This followed a 1.7 percent September increase. Shipments, up ten of the last eleven months, increased $2.7 billion or 0.6 percent to $484.2 billion. This followed a 1.1 percent September increase. Unfilled orders, down three of the last four months, decreased $0.2 billion or virtually unchanged to $1,135.1 billion. This followed a 0.3 percent September increase. The unfilled orders-to-shipments ratio was 6.68, unchanged from September. Inventories, up eleven of the last twelve months, increased $1.2 billion or 0.2 percent to $661.6 billion. This followed a 0.6 percent September increase. The inventories-to-shipments ratio was 1.37, unchanged from September.
  • New orders for manufactured durable goods in October, down following two consecutive monthly increases, decreased $1.9 billion or 0.8 percent to $237.4 billion, up from the previously published 1.2 percent decrease. This followed a 2.4 percent September increase. Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $3.4 billion or 4.2 percent to $77.4 billion. New orders for manufactured nondurable goods increased $1.6 billion or 0.7 percent to $242.2 billion.
  • Shipments of manufactured durable goods in October, up five of the last six months, increased $1.1 billion or 0.4 percent to $242.0 billion, up from the previously published 0.1 percent increase. This followed a 1.2 percent September increase. Primary metals, up three of the last four months, led the increase, $0.3 billion or 1.6 percent to $19.9 billion. Shipments of manufactured nondurable goods, up six of the last seven months, increased $1.6 billion or 0.7 percent to $242.2 billion. This followed a 1.0 percent September increase. Petroleum and coal products, up four consecutive months, led the increase, $1.2 billion or 2.6 percent to $46.2 billion.
  • Unfilled orders for manufactured durable goods in October, down three of the last four months, decreased $0.2 billion or virtually unchanged to $1,135.1 billion, unchanged from the previously published decrease. This followed a 0.3 percent September increase. Transportation equipment, also down three of the last four months, drove the decrease, $1.8 billion or 0.2 percent to $770.0 billion.
  • Inventories of manufactured durable goods in October, up fifteen of the last sixteen months, increased $0.6 billion or 0.2 percent to $404.2 billion, up from the previously published 0.1 percent increase. This followed a 0.6 percent September increase. Primary metals, also up fifteen of the last sixteen months, led the increase, $0.3 billion or 0.8 percent to $34.0 billion. Inventories of manufactured nondurable goods, up five consecutive months, increased $0.5 billion or 0.2 percent to $257.3 billion. This followed a 0.7 percent September increase. Chemical products, up three of the last four months, drove the increase, $0.9 billion or 1.0 percent to $84.1 billion. By stage of fabrication, October materials and supplies decreased 0.4 percent in durable goods and decreased 0.3 percent in nondurable goods. Work in process increased 1.0 percent in durable goods and decreased 0.3 percent in nondurable goods. Finished goods decreased 0.4 percent in durable goods and increased 0.9 percent in nondurable goods.

to gauge the effect of October factory inventories on 4th quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories increased 0.3% to $229,026 million; the value of work in process inventories was up 0.6% at $206,903 million, and materials and supplies inventories were valued 0.4% lower at $225,639 million...the producer price index for October indicated that prices for finished goods increased 0.3%, prices for intermediate processed goods were 1.0% higher, and that prices for unprocessed goods were on average unchanged....assuming similar valuations for like inventories, that would suggest that August's real finished goods inventories were little changed, while real inventories of intermediate processed goods were 0.4% smaller, and that real raw material inventory inventories were 0.4% smaller…since real factory inventories in the 3rd quarter were somewhat higher, any real inventory decreases in the 4th quarter will subtract from growth of 4th quarter GDP...

October Wholesale Sales Up 0.7%, Wholesale Inventories Down 0.5%

the September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at "$484.6 billion, up 0.7 percent (±0.5 percent) from the revised September level and were up 8.4 percent (±0.9 percent) from the October 2016 level. The August 2017 to September 2017 percent change was revised from the preliminary estimate of up 1.3 percent (±0.4 percent) to up 1.4 percent (±0.4 percent)" ...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold...

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted "$605.3 billion at the end of October, down 0.5 percent (±0.4 percent) from the revised September level. Total inventories were up 3.9 percent (±0.5 percent) from the revised October 2016 level. The September 2017 to October 2017 percent change was revised from the advance estimate of down 0.4 percent (±0.4 percent)* to down 0.5 percent (±0.4 percent)."

like factory inventories, to estimate the effect of October wholesale inventories on 4th quarter GDP we must first adjust them for changes in price with appropriate components of the producer price index...although details are not broken out, we've previously estimated that about 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories...as we noted earlier, the producer price index for October indicated that prices for finished goods increased 0.3%; thus the 0.5% decline in the nominal value of wholesale inventories suggest that the lion's share of real wholesale inventories were down on the order of 0.8% in October...since real wholesale inventories in the 3rd quarter were higher each month, such a real wholesale inventory decrease in the 4th quarter would necessarily subtract substantially from growth of 4th quarter GDP...

 

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

Sunday, December 3, 2017

3rd quarter GDP revision, October income and outlays, construction spending, and new home sales

major economic reports released over the past week included the 2nd estimate of 3rd quarter GDP and the October report on Personal Income and Spending, both from the Bureau of Economic Analysis, and the October report on Construction Spending (pdf) and the October report on new home sales, both from the Census bureau...in addition, the week brought us the last two regional Fed manufacturing surveys for November; the Richmond Fed Survey of Manufacturing Activity for November, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index jumped to a record high of +30 in November, up from +12 in October, suggesting a robust expansion of that region's manufacturing, while the Dallas Fed Texas Manufacturing Outlook Survey reported its general business activity index fell to +19.4 in November from +27.6 in October, still indicative of a strong expansion of the Texas economy...

the week’s privately issued reports included the Case-Shiller Home Price Index for September from S&P Case-Shiller, an index generated by averaging relative home sales prices from July, August and September of this year against a January 2000 baseline, and which reported that home prices nationally for those 3 months averaged 6.2% higher than prices for the same homes that sold during the same 3 month period a year earlier, up from the 6.1% year over year increase shown in the prior report; the light vehicle sales report for November from Wards Automotive, which estimated that vehicles sold at a 17.35 million annual rate in November, down 3.0% from the 17.89 million annual rate in October, and down 3.3% from the 17.95 million annual rate in November a year ago, and the widely followed November Manufacturing Report On Business from the Institute for Supply Management (ISM), which indicated that the manufacturing PMI (Purchasing Managers Index) fell to 58.2% in November, down slightly from 58.7% in October, still suggesting an ongoing expansion in manufacturing firms nationally...

3rd Quarter GDP Revised to Show Growth at a 3.3% Rate

the Second Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 3.3% rate in the quarter, revised up from the 3.0% growth rate reported in the advance estimate last month, as growth in both fixed investment and investment in inventories were revised higher, the decrease in our imports was greater than previously estimated, and state and local government spending were revised up from the prior estimate....in current dollars, our third quarter GDP grew at a 5.5% annual rate, increasing from what would work out to be a $19,250.0 billion a year rate in the 2nd quarter to a $19,509.0 billion annual rate in the 3rd quarter of this year, with the headline 3.3% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.1%, aka the GDP deflator, was applied to the current dollar change...

as we review this month's revisions, recall that the press release for the 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 2nd estimate of 3rd 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 4th quarter of 2013; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components in the most recent quarters; table 4, which shows the change in the price indexes for each of those 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...the pdf for the 3rd 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 2.4% growth rate reported last month to a 2.3% rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 3.9% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated inflation grew at a 1.5% annual rate in the 3rd quarter, which was statistically unrevised from the PCE inflation rate reported a month ago...real consumption of durable goods grew at a 8.1% annual rate, which was revised from the 8.3% growth rate shown in the advance report, and added 0.59 percentage points to GDP, as an increase in real consumption of motor vehicles and parts at a 12.6% rate accounted for almost half the durables goods increase...real consumption of nondurable goods by individuals grew at a 2.0% annual rate, revised from the 2.1% growth rate reported in the 1st estimate, and added  0.30 percentage points to 3rd quarter economic growth, as lower consumption of clothing and energy goods was more than offset by greater consumption of food and other non-durables ….at the same time, consumption of services rose at a 1.5% annual rate, statistically unrevised from the growth rate reported last month, and added 0.70 percentage points to the final GDP tally, as real consumption of health care rose at a 4.2% rate and accounted for 60% of the quarter’s growth in services...

meanwhile, seasonally adjusted real gross private domestic investment grew at a 7.3% annual rate in the 3rd quarter, revised from the 6.0% growth estimate reported last month, as real private fixed investment grew at a 2.4% rate, revised from the 1.5% rate reported in the advance estimate, while inventory growth was greater than previously estimated...investment in non-residential structures was revised to show contraction at a 6.8% rate, worse than the 5.2% contraction rate previously reported, while real investment in equipment was revised from growth at a rate of 8.6% to growth at a 10.5% rate, and the quarter's investment in intellectual property products was revised from growth at a 4.3% rate to growth at a 5.8% rate...on the other hand, real residential investment was shown to be shrinking at a 5.1% annual rate, rather than the 6.0% contraction rate previously reported…after those revisions, the decrease in investment in non-residential structures subtracted 0.20 percentage points from the 3rd quarter's growth rate, the increase in investment in equipment added 0.56 percentage points to the quarter's growth rate, lower residential investment subtracted 0.20 percentage points from GDP, while growth in investment in intellectual property added 0.23 percentage points to the growth rate of 3rd quarter GDP...

in addition, investment in real private inventories grew by an inflation adjusted $39.0 billion in the 3rd quarter, revised from the originally reported $35.8 billion of inventory growth...this came after inventories had grown at an inflation adjusted $5.5 billion rate in the 2nd quarter, and hence the $33.5 billion increase in real inventory growth added 0.80 percentage points to the quarter's growth rate, revised from the 0.73 percentage point addition from inventory growth that was indicated in the advance estimate....since growth in inventories indicates that more of the goods produced during the quarter were left in warehouses or "sitting on the shelf”, their increase by $33.5 billion meant that real final sales of GDP were relatively smaller by that much, and hence real final sales of GDP increased at a 2.5% rate in the 3rd quarter, down from the real final sales growth rate of 2.9% in the 2nd quarter, when the smaller increase in inventory growth meant that growth in real final sales was fairly close to real growth in GDP...

the previously reported increase in real exports was revised a bit lower with this estimate, while the previously reported decrease in real imports was revised even lower, and as a result the change in our net trade was a larger addition to GDP rather than was previously reported...our real exports grew at a 2.2% rate rather than the 2.3% 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 0.27 percentage points to the 3rd quarter's growth rate, down a tad from the 0.28 percentage point addition shown in the previous report....meanwhile, the previously reported 0.8% decrease in our real imports was revised to a 1.1% decrease, and since imports are subtracted from GDP because they represent either consumption or investment that was not produced here, their decrease conversely added 0.17  percentage points to 3rd quarter GDP, rather than the 0.12 percentage point addition shown last month....thus, our improving trade balance added a rounded total of 0.43 percentage points to 3rd quarter GDP, rather than the (rounded) 0.41 percentage point addition that had been indicated by the advance estimate…

finally, the entire government sector grew at a 0.4% rate, revised from a contraction at a 0.1% rate previously reported, as federal government consumption and investment grew more than initially estimated, while real state & local government consumption and investment shrunk less...real federal government consumption and investment was seen to have grown at a 1.3% rate from the 2nd quarter in this estimate, revised from the 1.1% growth rate shown in the advance estimate, as real federal outlays for defense grew at a 2.4% rate and added 0.09 percentage points to 3rd quarter GDP, revised from the 2.3% growth rate shown previously, while all other federal consumption and investment shrunk at a 0.3% rate and subtracted 0.01 percentage point from 3rd quarter GDP....meanwhile, real state and local consumption and investment shrunk at a 0.1% rate in the quarter, which was revised from the 0.9% contraction rate reported in the 1st estimate, and subtracted 0.01 more percentage point from 3rd 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, indicating an increase in the output of those goods or services...

Personal Income up 0.4% in October, Personal Spending up 0.3%, PCE Price Index up 0.1%

the October report on Personal Income and Outlays from the Bureau of Economic Analysis includes the month's data for our personal consumption expenditures (PCE), which accounts for roughly 69.5% of the month's GDP, and with it the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated...in addition, this release reports our personal income data, disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the dollar value change reported for each of those metrics is 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 October'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 September to October....

thus, when the opening line of the press release for this report tell us "Personal income increased $65.1 billion (0.4 percent) in October", they mean that the annualized figure for seasonally adjusted personal income in October, $16,574.6 billion, was $65.1 billion, or a bit less than 0.4% greater than the annualized personal income figure of $16,509.5 billion extrapolated for September; the actual, unadjusted change in personal income from September to October is not given...at the same time, annualized disposable personal income, which is income after taxes, rose by less than 0.5%, from an annual rate of $14,447.2 billion in September to an annual rate of $14,513.3 billion in October...the monthly contributors to the increase in personal income, which can be viewed in detail in the Full Release & Tables (PDF) for this release, are also annualized...in October, the largest contributors to the $65.1 billion annual rate of increase in personal income were a $26.0 billion increase in wages and salaries and a $19.2 billion increase in dividend and interest income…

for the personal consumption expenditures (PCE) that we're most interested in, BEA reports that they increased at a $34.4 billion rate, or by less than 0.3%, as the annual rate of PCE rose from $13,523.0 billion in September to $13,557.4 in October....September PCE was revised from $13,531.2 billion annually to $13,523.0 billion, a revision that was already included in the 2nd estimate of 3rd quarter GDP which we just reviewed (this report, although usually released a business day later than the GDP release, is computed concurrently)....the current dollar increase in October spending resulted from a $5.0 billion annualized increase to an annualized $4,355.7 billion in spending for goods, and a $29.4 billion increase to an annualized $9,201.7 billion in spending for services...total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $38.7 billion to $14,056.0 billion annually in October, which left total personal savings, which is disposable personal income less total outlays, at a $457.3 billion annual rate in October, up from the revised $429.9 billion in annualized personal savings in September... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 3.2% in October from the September savings rate of 3.0%, which was a post recession low...

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 was at 113.245 in October, up from 113.082 in September, giving us a PCE price index change and an inflation adjustment of 0.0144% in October, which the BEA rounded to +0.1% for the press release...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 that of another....that result is shown in table 7 of the PDF, where we see that October's chained dollar consumption total works out to 11,972.4 billion annually, 0.1095% more than September's 11,959.3 billion, a difference that the BEA reports as +0.1%...

however, to estimate the impact of the change in October PCE on the change in GDP, the month over month change in PCE doesn't help us much, since GDP is reported quarterly...thus we have to compare October's real PCE to the the real PCE of the 3 months of the third 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 of the pdf for this report, where we find that the annualized real PCE for the 3rd quarter was represented by 11,921.1 billion in chained 2009 dollars..(ie, that's the same as what's shown in table 3 of the pdf for the 3rd quarter GDP report)....when we compare October's real PCE representation of 11,972.4 to the 3rd quarter real PCE figure of 11,921.1, we find that October real PCE has grown at a 1.73% annual rate compared to the 3rd quarter....that would mean that even if October real PCE does not improve during November and December, growth in PCE would still add 1.20 percentage points to the growth rate of the 4th quarter...

Construction Spending Rose 1.4% in October after Prior Months Were Revised Higher

the Census Bureau's report on construction spending for October (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,241.5 billion annually if extrapolated over an entire year, which was 1.4 percent (±1.5 percent)* above the revised annualized September estimate of $1,224.6 billion and also 2.9 percent (±1.6 percent) above the estimated annualized level of construction spending in October of last year...the annualized September construction spending estimate was revised 0.4% higher, from $1,219.5 billion to $1,224.6 billion, while the annual rate of construction spending for August was also revised 0.4% higher, from $1,216.0 billion to $1,220.8 billion...the combined upward revisions of $9.9 billion to annualized August and September construction spending figures would be averaged over the 3 months of the quarter and increase 3rd quarter construction by around $3.3 billion annually, and would thus imply a further upward revision of about 0.09 percentage points to third quarter GDP when the third estimate is released on December 22nd....

quoting details on types of construction spending from the Census release: Spending on private construction was at a seasonally adjusted annual rate of $949.9 billion, 0.6 percent (±0.8 percent)* above the revised September estimate of $943.8 billion. Residential construction was at a seasonally adjusted annual rate of $517.7 billion in October, 0.4 percent (±1.3 percent)* above the revised September estimate of $515.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $432.2 billion in October, 0.9 percent (±0.8 percent) above the revised September estimate of $428.4 billion.   In October, the estimated seasonally adjusted annual rate of public construction spending was $291.6 billion, 3.9 percent (±2.6 percent) above the revised September estimate of $280.7 billion. Educational construction was at a seasonally adjusted annual rate of $79.0 billion, 10.9 percent (±2.5 percent) above the revised September estimate of $71.2 billion. Highway construction was at a seasonally adjusted annual rate of $86.8 billion, 1.1 percent (±6.3 percent)* above the revised September estimate of $85.9 billion.

as you can see, 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 October spending reported in this release on 4th quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price... there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for all of those types of construction separately, we've opted to 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 0.5% month over month in October, after being up 0.3% in August and rising 0.1% in September... 

on that basis, we can estimate that October construction costs were roughly 0.9% more than those of July, 0.6% more than those of August, and obviously 0.5% more than September...we then use those percentages to inflate higher priced spending figures for each of those months, which is arithmetically the same as deflating October construction spending, for purposes of comparison...annualized construction spending in millions of dollars for the third quarter months is given as 1,224,551 in September, 1,220,897 in August, and 1,160,407 in July...thus to adjust October's nominal construction spending of $1,241,538 million for inflation compared to that of the third quarter, our formula becomes: 1,241,538  / (((1,224,551 * 1.005) + ( 1,220,897 *1.006) + (1,215,351 * 1.009)) / 3) = 1.010699, meaning real construction spending in October was up 1.07% vis a vis that of the 3rd quarter, or up at a 4.35% annual rate...to figure the effect of that change on GDP,  we figure the difference between the third quarter average and October and take the annualized result of that as a fraction of annualized 3rd quarter GDP, and find that October construction spending is rising at a rate that would add 0.34 percentage points to 4th quarter GDP, assuming hypothetically that there would be no change over the next two months…

Average Prices for New Homes Sold in October Tops $400 K

the Census report on New Residential Sales for October (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 685,000 homes annually, which was 6.2 percent (±18.0 percent)* above the revised September rate of 645,000 new single family home sales a year and 18.7 percent (±23.5 percent)* above the estimated annual rate that new homes were selling at in October of last year....the asterisks indicates that based on their small sampling, Census could not be certain whether October new home sales rose or fell from those of September, or even from those of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales new single family homes in September were revised from the annual rate of 677,000 reported last month down to a 645,000 a year rate, while home sales in August, initially reported at an annual rate of 580,000 and revised to a 561,000 a year rate last month, were revised to a 565,000 a year rate with this report, and while July's home sale rate, initially reported at an annual rate of 571,000 and revised from a 580,000 a year rate to a 582,000 a year rate last month, were revised down to a 564,000 annaul 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 55,000 new single family homes sold in October, up from the estimated 50,000 new homes that sold in September and up from the 48,000 that sold in October a year ago.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in October was $312,800, down from the median sale price of $314,900 in September but up from the median sales price of $302,800 in October a year ago, while the average new home sales price in October was $400,200, up from the $381,100 average sales price in September, and up from the average sales price of $352,200 in October a year ago....a seasonally adjusted estimate of 282,000 new single family houses remained for sale at the end of October, which represents a 4.9 month supply at the October sales rate, down from the reported 5.0 months of new home supply in September...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increase to 685,000 Annual Rate in October and A few Comments on October New Home Sales

 

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

Sunday, November 26, 2017

October’s durable goods, existing home sales

there were just a couple of widely watched reports released this week, with no releases on Thanksgiving or Friday....Tuesday saw the Existing Home Sales Report for October from the National Association of Realtors (NAR), and Wednesday saw the advance report on durable goods for October and the October report on new home sales, both from the Census bureau...in addition, Tuesday also saw the release of the Chicago Fed National Activity Index (CFNAI) for October, a weighted composite index of 85 different economic metrics, which rose to +0.65 in October from +0.36 in September, revised from the -0.17 that had been reported for September last month....that boosted the 3 month average of the CFNAI to +0.28 in October, up from a revised +0.01 in September, which indicates that national economic activity has been somewhat above the historical trend over those recent months....

October Durable Goods: New Orders Down 1.2%, Shipments Up 0.1%, Inventories Up 0.1%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for October (pdf) from the Census Bureau reported that the value of the widely followed new orders for manufactured durable goods decreased by $2.8 billion or 1.2 percent to $236.0 billion in October, after September's new orders were revised from the $238.7 billion reported last month to $238.8 billion, still 2.2% greater than August's orders...year to date new orders are still 4.9% above those of 2016, down from the +5.2% year over year change we saw in this report last month....the volatile monthly change in new orders for transportation equipment was responsible for the drop, as new transportation equipment orders fell $3.5 billion or 4.3 percent to $77.1 billion, on a 18.6% decrease to $10,575 million in new orders for commercial aircraft....excluding orders for transportation equipment, new orders rose 0.4%, and excluding just new orders for defense equipment, new orders fell 0.8%....meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $354 million or 0.4% to $66,172 million...

meanwhile, the seasonally adjusted value of October shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for any changes in prices, increased by $0.3 billion or 0.1 percent to $241.0 billion, after September shipments were revised from from $240.5 billion to $240.64 billion, still up 1.0% from August...shipments of transportation equipment were down 0.5% on a 12.5% decrease in shipments of commercial aircraft, while a $0.3 billion or 1.5% increase to $19.9 billion in shipments of primary metals led the overall shipments increase...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 15th time in 16 months, increasing by $0.5 billion or 0.1 percent to $404.1 billion, after September inventories were revised from $403.6 billion to $403.546 billion, still up 0.6% from August...a $0.1 billion or 0.4 percent increase to $33.9 billion in inventories of primary metals accounted for most of the increase, as transportation equipment inventories were statistically unchanged...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, decreased for the third time in 4 months, falling fractionally by $0.5 billion to $1,134.6 billion, following a September increase of 0.2% to $1,135.1 billion, the same as what was previously reported...a $2.0 billion or 0.3 percent to $769.7 billion decrease in unfilled orders for transportation equipment was responsible for the decrease, as unfilled orders excluding transportation equipment orders were up 0.4% to $364,890 million...compared to a year earlier, the unfilled order book for durable goods is just 0.4% above the level of last October, with unfilled orders for transportation equipment still 1.3% below their year ago level, largely on a 2.0% decrease in the backlog of orders for commercial aircraft....  

Existing Home Sales Up 2.0% in October

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 2.0% from September to October, projecting that 5.48 million existing homes would sell over an entire year if the October home sales pace were extrapolated over that year, a pace that was still 0.9% below the annual sales rate projected in October of a year ago...September sales, now shown at a 5.37 million annual rate, were revised down from the 5.39 million annual rate that was indicated in last month's report...the NAR also reported that the median sales price for all existing-home types was $247,000 in October, down fractionally from $247,600 in September but 5.5% higher than in October a year earlier, which they report as "the 68th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Grow 2% in October", 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 458,000 homes sold in October, down by 0.9% from the 462,000 homes that sold in September, and up by 2.9% from the 445,000 homes that sold in October of last year, so we can see that it was just a seasonal adjustment that caused the annualized published figures to show an increase......that same pdf indicates that the median home selling price for all housing types fell 0.2%, from a revised $247,600 in September to $247,000 in October, while the average home sales price was $288,400, down 0.4% from the $289,600 average sales price in September, but up 4.7% from the $275,500 average home sales price of October a year ago...regionally, average home sales prices ranged from a low of $225,100 in the Midwest to a high of $395,900 in the West, with only the West seeing average home prices rise by $2,100... 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 Grow 2.0 Percent in October" and A Few Comments on October 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, November 19, 2017

October’s consumer prices, retail sales, industrial production, producer prices, and new housing; September’s business inventories..

major agency reports released this week included Retail Sales Report for October and the Business Sales and Inventories Report for September from the Census Bureau, the October Consumer Price Index, the October Producer Price Index and the October Import-Export Price Index from the Bureau of Labor Statistics, the October report on Industrial Production and Capacity Utilization from the Fed, and the October report on New Residential Construction, also from the Census Bureau...in addition, the BLS also released the Regional and State Employment and Unemployment for October on Friday, which breaks down the establishment survey and household survey data from the monthly jobs report released two weeks ago by region and by state...

this week also saw the release of three regional Fed manufacturing surveys for November: 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 from +30.2 in October to +19.4 in November, still suggesting decent growth of First District manufacturing;  the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, also reported its broadest diffusion index of manufacturing conditions moved lower, from a reading of +27.9 in October to +22.7 in November, also suggesting an ongoing strong expansion of that the region's manufacturing, while the Kansas City Fed manufacturing survey, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index fell to +16 in November, down from +23 in October and +17 in September, also suggesting an ongoing expansion in that region's manufacturing for the twelfth month in a row...

October CPI up 0.1% on Higher Housing Costs

the consumer price index increased by 0.1% in October, as higher prices for housing were only partially offset by a retreat in gasoline prices...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.1% in October after it had risen 0.5% in September, 0.4% in August. 0.1% in July, and after it was unchanged in June and had fallen 0.1% in May....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually fell from 246.819 in September to 246.663 in October, which left it statistically 2.041% higher than the 241.729 index reading of last October, which is reported as a 2.0% year over year increase...with the drop prices for gasoline large enough to impact the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, with the unadjusted core index rising from  252.941 to 253.638, which put it 1.774% ahead of its year ago reading of 249.218...

the volatile seasonally adjusted energy price index fell by 1.0% in October, after it had risen by 6.1% in September, 2.8% in August, but after it had fallen by 0.1% in July, 1.6% in June, and 2.7% in May...prices for energy commodities were 2.3% lower while the index for energy services rose by 0.4%, after falling by 0.2% in September....the decrease in the energy commodity index included a 2.4% cut in the retail price of gasoline, the largest component, and a 2.3% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, fell by an average of 0.5%…however, energy commodities are still priced 10.8% above their year ago levels, with gasoline prices also averaging 10.8% higher than they were a year ago.…within energy services, the index for utility gas service rose by 0.3% after decreasing by 0.8% in September, leaving utility gas priced 3.2% higher than it was a year ago, while the electricity price index rose by 0.5%, after being unchanged over the prior two months...meanwhile, the energy services price index is now 2.2% higher than last October, as even electricity prices have increased by 2.0% over that period..

the seasonally adjusted food price index was unchanged in October, after 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% in January, but after being unchanged in each of the prior 6 months, as the index for food purchased for use at home was unchanged in October, while prices for food bought to eat away from home was 0.1% higher, as prices at fast food outlets and prices at full service restaurants both rose 0.2%, while food prices at schools fell 4.0%...

in the food at home categories, the price index for cereals and bakery products decreased by 0.5%, as prices for bread fell 0.6% while other bakery product prices fell 1.2%...the price index for the meats, poultry, fish, and eggs group was up 0.2% as egg prices rose 5.7% and processed fish and seafood prices rose 1.6%, while the index for dairy products was 0.3% lower on 1.2% decrease in the price of fresh whole milk...the fruits and vegetables index was unchanged as a 0.4% increase in prices for fresh vegetables was offset by a 1.3% decrease in prices for canned fruits and vegetables....the beverages index was also unchanged as roast coffee prices were down 0.3% while carbonated drink prices rose 0.3%....lastly, prices in the ‘other foods at home’ category were 0.2% lower on average, as butter prices fell 2.0% and salad dressing prices were 0.8% lower....among food at home line items, only bacon, which is now priced 11.8% higher than a year ago, and oranges, which are up 10.5%, have seen a price changes 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 October after rising by 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 0.1%, 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 October retail sales for inflation in national accounts data, the index for household furnishings and supplies was 0.2% lower on a 1.5% decrease in prices for bedroom furniture and a 1.1% decrease in prices for furniture other than bedroom, living room and kitchen furniture, while the apparel price index was 0.1% lower as a 4.2% increase in prices for men's suits and outerwear was offset by a 2.2% decrease in prices for women's outwear...on the other hand, prices for transportation commodities other than fuel were up 0.1%, as prices for used cars were up 0.7% while prices for new cars fell 0.3%...meanwhile, prices for medical care commodities were unchanged as a 0.2% decrease in prescription drug prices was offset by 0.2% increase in nonprescription drug prices...at the same time, the recreational commodities index was 0.2% lower as another 3.3% drop in TV prices was only partially offset by a 1.6% increase in prices for other video equipment and a 0.7% increase in prices for photographic equipment...meanwhile, the education and communication commodities index was 0.1% higher on a 0.7% increase in prices for college textbooks and a 1.9% increase in prices for computer software and accessories...lastly, a separate price index for alcoholic beverages was up 0.1% on 0.2% higher wine prices, while the price index for ‘other goods’ was up 0.9% on a 1.6% increase in the index for tobacco and smoking products and a 1.7% increase in the index for stationery, gift wrap and other personal paper supplies..

within core services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.3% increase in owner's equivalent rent, and a 1.8% increase in costs for lodging away from home at hotels and motels, while costs for water, sewers and trash collection rose 0.3% and other household operation costs were up 0.7%....at the same time, the index for medical care services was also up 0.3%, as prices for both inpatient hospital services rose 0.5% and nursing homes and adult day services were 0.7% higher...meanwhile, the transportation services index was 0.2% higher on a 0.6% increase in airline fares and 0.5% higher motor vehicle repairs....the recreation services index fell 0.1% as film processing fell 1.1% and admissions to sporting events fell 0.5%, while the index for education and communication services rose 0.2% as delivery services rose 1.2% and wireless phone services rose 0.4%...lastly, the index for other personal services rose 0.1% as tax return services rose 0.3%...among core line items, prices of televisions, which are now 10.3% lower than last October, the index for clocks, lamps, and decorator items, which is now 12.1% lower than a year ago, and prices for wireless phone services, which are still 10.8% lower than a year ago, have seen prices drop by more than 10% over the past year, while no core line item has seen prices rise by a double digit magnitude in that span...

Retail Sales Rise 0.2% in October after Big September Increase Revised 0.3% Higher

seasonally adjusted retail sales increased in October after retail sales for August and September were revised higher...the Advance Retail Sales Report for October (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $486.6 billion during the month, which was up 0.2 percent (±0.5%) from September's revised sales of $485.4 billion and 4.6 percent (±0.7%) above the adjusted sales in October of last year...September's seasonally adjusted sales were revised from $483.9 billion to $485.4 billion, while August's sales were also revised a bit higher but were statistically unchanged at $476.5 billion with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 1.0%, from $470,402 million in September to $475,339 million in October, while they were up 4.6% from the $454,601 million of sales in October a year ago...the total $1.5 billion upward revision to September sales should boost the previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.10 percentage points, or maybe more, since the majority of the upward revision was in lower prices auto sales...

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

October 2017 retail sales table

from this table, we can see that October sales were again underpinned by a 0.7% increase to $101,919 million in seasonally adjusted sales at motor vehicle and parts dealers; without which retail sales would have just shown a 0.1% increase for the month...on the other hand, sales at both building material supply stores, which were up 3.0% in September, and at gas stations, which were up 6.4% in the prior month, were both down 1.2% in October, in a reversal of their hurricane driven September strength, dragging overall sales lower...as we saw in reviewing the CPI, the composite of all goods less food and energy goods rose by 0.1%, so real core sales will be roughly 0.1% lower than the nominal sales reported here...on the other hand, grocery store sales, up 0.6%, will not be deflated, as food at home prices were unchanged, while real gasoline sales would be 2.4% higher than nominal sales, reflecting the lower price for gasoline...furthermore, October sales piggyback on the September 1.9% jump, meaning that they'll be more than 2% higher than July and August sales when the third quarter to fourth quarter comparisons are made for GDP purposes...

Industrial Production Up 0.9% in October, after prior months revised higher

the Fed's G17 release on Industrial production and Capacity Utilization reported that  industrial production increased by 0.9% in October after rising by a revised 0.4% in September but after falling by a revised 0.5 percent in August, on "a return to normal operations after Hurricanes Harvey and Irma suppressed production in August and September."….the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 106.1 in October from 105.2 in September, which was revised from the 104.6 index level reported last month...at the same time, the August index was revised from 104.3 to 104.7, and the July index was revised from 105.1 to 105.2....as a result of those revisions, industrial production is now 2.9% higher than a year ago, a relatively big jump from last month's reported 1.6% year over year increase....

the manufacturing index, which accounts for more than 77% of the total IP index, increased by 1.3%, from 103.5 in September to 104.8 in October, after September's manufacturing index was revised up from 103.0 to 103.5, August's index was revised up from 102.9 to 103.1, and July's index was revised up from 103.2 to 103.3....on the other hand, the mining index, which includes oil and gas well drilling, fell by 1.3%, from 110.3 in September to 108.9 in October, after the September index was revised up from 110.1, still leaving the mining index 6.4% higher than it was a year ago....meanwhile, the utility index, which often fluctuates due to above or below normal temperatures, rose 2.0% in October, from 101.6 to 103.6, after the September utility index was revised up from 100.4 and the August utility index was revised up from 98.9 to 102.7...as a result of those & prior revisions back to May, the utility index is now 0.9% higher than it was a year earlier..

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 77.0% in October from 76.4% in September, which was revised from the 76.0% utilization reported in last month’s report ...capacity utilization of NAICS durable goods production facilities rose from 75.5% in September to 75.7% in October, after September's figure was revised down from 76.0%, while capacity utilization for non-durables producers rose from 76.4% in September to 78.1% in October, after September's nondurables utilization was revised up from 76.3%...capacity utilization for the mining sector fell to 82.4% in October from 83.7% in September, which was originally reported as 83.5%, while utilities were operating at 77.2% of capacity during October, up from their 75.7% of capacity during September, which was revised up from the previously reported 74.8%...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 October on Higher Gas Station Margins and Wholesale Drug Prices

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.4% in October, as prices for finished wholesale goods increased 0.3%, while margins of final services providers increased by 0.5%...this followed a September report that indicated the overall PPI had increased by 0.4%, as prices for finished wholesale goods increased 0.7%, while margins of final services providers increased by 0.4%, and an August report that indicated the PPI was up 0.2%, with prices for finished wholesale goods up 0.5%, and margins of final services providers up 0.1%....excluding food, energy and trade services, core producer prices were up 0.2% in October, after also rising 0.2% in both August and September...on an unadjusted basis, producer prices are now 2.8% higher than a year earlier, the highest annual producer inflation reading since the same increase was logged in February 2012, while the core producer price index increased to 2.3% higher than a year earlier...

as we noted, the price index for final demand for goods, aka 'finished goods', rose 0.3% in October, after rising 0.7% in September, 0.5% in August, slipping 0.1% in July, being unchanged in June, falling by a revised 0.5% 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 was unchanged in October after rising 3.4% in September and 3.3% in August, while the price index for wholesale foods rose 0.5% and the index for final demand for core wholesale goods (ex food and energy) was 0.3% higher...the largest wholesale energy price change was a 14.5% increase in the wholesale price of home heating oil and distillates, while the wholesale price of gasoline fell 4.5%....meanwhile, a 29.0% increase in the wholesale price of eggs and a 12.1% increase in wholesale prices for fresh and dry vegetables pushed the food index higher....among wholesale core goods, wholesale prices for pharmaceutical preparations rose 2.1% and accounted for nearly half of the increase in goods prices, while the index for industrial chemicals was up 5.2%…

at the same time, the index for final demand for services rose 0.5% in October, after rising 0.4% in September, 0.1% in August, and after a revised 0.1% increase in July and a revised unchanged June, as the October index for final demand for trade services rose 1.1%, the index for final demand for transportation and warehousing services rose 1.0%, 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 increased 24.9% and accounted for nearly half of the increase in services, while margins for book retailers fell 10.8%... among transportation and warehousing services, margins for airline passenger services were 3.2% higher and margins for rail passenger services rose 1.6%...in the core final demand for services index, the index for portfolio management rose 1.7%, while the index for gaming receipts (partial) fell 2.3%...

this report also showed the price index for processed goods for intermediate demand was 1.0% higher, after rising 0.5% in September, 0.4% in August, but after falling by a revised  0.1% in July and rising by a revised 0.1% June....the price index for intermediate energy goods rose 1.8% as diesel fuel rose 8.4% and industrial electric power rose 3.0%, while prices for intermediate processed foods and feeds rose 0.8% on a 4.7% jump in wholesale prices for prepared animal feeds, and the core price index for processed goods for intermediate demand less food and energy was also 0.8% higher on a 5.2% increase in the index for industrial chemicals...prices for intermediate processed goods are now 5.0% higher than in September a year ago, now the twelfth 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 was unchanged in October, after falling  0.4% in September, 0.7% in August, but after rising a revised 0.1% in June and July....the price index for crude energy goods rose 2.1% as crude oil prices rose 6.6%, while the index for unprocessed foodstuffs and feedstuffs rose 0.4%, as increases in the indexes for slaughter cattle, ungraded chicken eggs and farm fresh vegetables (except potatoes) more than offset a 13.0% drop in prices for slaughter hogs...however, the index for core raw materials other than food and energy materials fell 3.7%, as prices for carbon steel scrap fell 9.5 and prices for wastepaper fell 28.8%...this raw materials index is still up 7.7% from a year ago, up from the year over year increase of 7.0% that we saw in September...

lastly, the price index for services for intermediate demand rose 0.3% in October after rising 0.1% in September and 0.2% in August, but after falling a revised 0.1% in July...the index for trade services for intermediate demand was 0.5% higher, as margins for metals, minerals, and ores wholesalers rose 5.7 percent…the index for transportation and warehousing services for intermediate demand was also up 0.5%, as intermediate prices for transportation of passengers (partial) rose 3.0%...meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.2% higher, as margins for securities brokerage, dealing, and investment advice rose 2.0%...over the 12 months ended in October, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.9% higher than it was a year ago...

Housing Starts, Building Permits Increase in October

the October report on New Residential Construction(pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,290,000 units during the month, which was 13.7 percent (±10.5 percent) above the revised September estimated annual rate of 1,135,000 housing unit starts, but was still 2.9 percent (±10.1 percent)* below last October's pace of 1,328,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell from a year ago, with the figure in parenthesis the most likely range of the change indicated; in other words, in other words, this October's housing starts could have been up by 7.2% or down by as much as 13.0% from those of October a year ago, with even larger revisions possible after a number of months...in this report, the annual rate for September housing starts was revised from the 1,127,000 reported last month to 1,135,000, and the annual rate for August housing starts, which was revised from 1,180,000 to 1,183,000 last month, was revised down to 1,172,000 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 canvassing Census field agents, which estimated that 112,300 housing units were started in October, up from the 101,900 units that were started in September...of those housing units started in October, an estimated 74,900 were single family homes and 35,600 were units in structures with more than 5 units, up from the revised 72,800 single family starts in September, and up from the 27,500 units started in structures with more than 5 units in September...

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 October, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,297,000 housing units, which was 5.9 percent (±1.4 percent) above the September rate of 1,225,000 permits, and was 0.9 percent (±1.6 percent) above the rate of building permit issuance in October a year earlier...the annual rate for housing permits issued in September was revised from 1,215,000 to 1,225,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted data collected monthly by canvassing census agents, which estimated that permits for 112,100 housing units were issued in October, up from the revised estimate of 101,400 new permits issued in September...the October permits included 69,800 permits for single family homes, up from 66,600 single family permits issued in September, and 38,300 permits for housing units in apartment buildings with 5 or more units, up from 33,700 such multifamily permits a month earlier...

Business Sales Up 1.4% in September, Business Inventories Flat

after the release of the October retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for September (pdf), which incorporates the revised September retail data from that October report and the earlier published September 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 $1,389.7 billion in September, up 1.4 percent (±0.2 percent) from August's revised sales, and up 6.4 percent (±0.4 percent) from September sales of a year earlier...note that total August sales were concurrently revised up from the originally reported $1,369.2 billion to $1,370.8 billion....manufacturer's sales were up 0.8% to $480,390 million in September, and retail trade sales, which exclude restaurant & bar sales from the revised September retail sales reported earlier, rose 2.1% to $428,747 million, while wholesale sales rose 1.3% to $480,524 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,888.7 billion at the end of September, statistically unchanged (±0.1%)* from August, and 3.5 percent (±0.3 percent) higher than in September a year earlier...the value of end of August inventories were revised from the $1,889.0 billion reported last month to $1,888.0 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $660,752 million, up 0.7% from August, inventories of retailers were valued at $618,408 million, 0.9% less than in August, while inventories of wholesalers were estimated to be valued at $609,535 million at the end of September, 0.3% higher than in August...

the BEA's key source data and assumptions (xls) for 3rd quarter GDP appears to indicate that they had estimated that the value of non-durable goods inventories would decrease at a $45.3 billion annual rate in September, before adjustment with the PPI, so the $0.7 billion one month increase would be at roughly an $8.5 billion annual rate, meaning that they underestimated the September inventory component at an annual rate of $53.8 billion….if i’ve figured out what they’ve done there correctly, that would imply that the contribution of inventory component of 3rd quarter GDP will be revised upwards by around 0.34 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, November 12, 2017

September job openings, wholesale sales & inventories

the only agency reports released this week were the Job Openings and Labor Turnover Survey (JOLTS) for September from the Bureau of Labor Statistics, the September report on Wholesale Trade, Sales and Inventories from the Census Bureau, and the Consumer Credit Report for September from the Fed...the later showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $20.8 billion, or at a 6.6% annual rate, as non-revolving credit expanded at a 6.3% rate to $2,782.3 billion and revolving credit outstanding rose at a 7.7% rate to $1,005.6 billion...this week also saw the release of the Mortgage Monitor for September (pdf) from Black Knight Financial Services, which indicated that 4.40% of all mortgages were delinquent in September, up from 3.93% in August and up from 4.27% in September of 2016, and that 0.70% of all mortgages were in the foreclosure process, down from from 0.76% in August and down from 1.00% a year ago....mortgage delinquencies have been elevated in regions of the country where properties have experienced hurricane damage...

Job Openings Little Changed in September; Hiring Down, Job Quitting Up

the Job Openings and Labor Turnover Survey (JOLTS) report for September from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 3,000, from 6,090,000 in August to 6,093,000 in September, after August job openings were revised 8,000 higher, from 6,082,000 to 6,090,000...September's jobs openings were still 7.5% higher than the 5,666,000 job openings reported in September a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged at 4.0% in September, while it was up from 3.8% a year ago...there were wide differences in job openings between industries, from the 156,000 job opening increase to 1,055,000 openings in the broad professional and business services sector, to the 111,000 job opening decrease to 757,000 openings in the leisure and hospitality sector (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 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 September, seasonally adjusted new hires totaled 5,273,000, down by 147,000 from the revised 5,420,000 who were hired or rehired in August, as the hiring rate as a percentage of all employed fell to 3.6% from 3.7% in August, while it was unchanged from September a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 33,000, from 5,273,000 in August to 5,240,000 in September, while the separations rate as a percentage of the employed remained unchanged at 3.6%, the same as in September a year ago (see table 3)...subtracting the 5,240,000 total separations from the total hires of 5,273,000 would imply an increase of 33,000 jobs in September, a bit more than the revised payroll job increase of 18,000 for September reported in the October establishment survey last week, but well within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,192,000 of us voluntarily quit our jobs in September, up from the revised 3,093,000 who quit their jobs in August, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.1% to 2.2% of total employment, which was also up from 2.1% a year earlier (see details in table 4)....in addition to those who quit, another 1,703,000 were either laid off, fired or otherwise discharged in September, down by 78,000 from the revised 1,781,000 who were discharged in August, as the discharges rate remained at 1.2% of all those who were employed during the month, which was still up from the discharges rate of 1.0% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 355,000 in September, down from 398,000 in August, for an 'other separations rate’ of 0.2%, which was down from 0.3% in August, but the same as the 'other separations rate' of 0.2% in September 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...

September Wholesale Sales Up 1.5%, Wholesale Inventories Up 0.3%

the September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $480.5 billion, up 1.3 percent (±0.4 percent) from the revised August level, and up 8.5 percent (±1.2 percent) from the wholesale sales of September 2016... the August preliminary estimate was revised up to $474.5 billion from the $473.4 billion in wholesale sales reported last month, which revised the July to August change to +1.9%.... September wholesale sales of durable goods were up 0.7 percent from August and were up 9.8 percent from a year earlier, with a 3.4% increase in wholesale sales of metals and minerals leading the durables increase for the month, while wholesale sales of nondurable goods were up 1.8 percent from August and were up 7.4 percent from last September, with a 12.6% increase in wholesale sales of petroleum and petroleum products offsetting decreases in wholesales sales of most other non-durables...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted $609.5 billion at month end, up 0.3 percent (±0.4 percent)* from the revised August level and 8.5 percent (±1.2 percent) higher than in September a year ago....August's inventory value was revised from $608.1 billion to $607.47 billion, which meant that the July to August percent change was revised from the advance estimate of +0.9 percent to +0.8 percent...wholesale inventories of durable goods were up 0.3 percent from August, and were up 5.7 percent from a year ago, with 0.7% higher wholesale inventories of  electrical and electronic goods leading the September durables increase...at the same time, the value of wholesale inventories of nondurable goods were up 0.4 percent from August and were up 3.0 percent from last September, as the value of wholesale inventories of petroleum and petroleum products was up 3.0%, largely on higher prices, as the Energy department has been reporting falling inventories all summer…

 

(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…)