Sunday, May 28, 2017

1st quarter GDP revision; April durable goods, new home sales, and existing home sales.

the major release of this past week was the second estimate of 1st quarter GDP from the Bureau of Economic Analysis; other widely watched releases included the April advance report on durable goods and the April report on new home sales, both from the Census bureau, and the Existing Home Sales Report for April from the National Association of Realtors….this week also saw the Chicago Fed National Activity Index for March, a weighted composite index of 85 different economic metrics, which rose to +0.49 in April from +0.07 in March,  after the March index was revised from the +0.08 reported last month...as a result, the 3 month average of that index rose to +23 in April, up from a neutral reading in March, which indicates that national economic activity has been above the historical trend over recent months...

two regional Fed manufacturing surveys for May were also released this week: 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 plunged to +1, following last month's reading of +20, indicating virtual stagnation in that region's manufacturing, while the Kansas City Fed manufacturing survey for April, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to +8 in May, up from + 7 in April but down from readings of +20 in March and +14 in February, thus indicating a more modest pace of growth in that region's manufacturing...

1st Quarter GDP Revised to Show Growth at a 1.2% Rate

the Second Estimate of our 1st Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 1.2% rate in the 1st quarter, revised up from the 0.7% growth rate reported in the advance estimate last month, as real personal consumption expenditures and fixed investment were revised higher, and real government outlays were down less than had previously been reported...in current dollars, our first quarter GDP grew at a 3.4% annual rate, increasing from what would work out to be a $18,869.4 billion a year output rate in the 4th quarter of 2016 to a $19,027.6 billion annual rate in the 1st quarter of this year, with the headline 1.2% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.2%, aka the GDP deflator, was applied to the current dollar change...

remember that this 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 second estimate of 1st quarter GDP, which we find linked to on the sidebar of the BEA press release...specifically, we cite the data from table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2013, from 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 full pdf for the 1st quarter advance estimate, which this estimate revises, is here...

growth in real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 0.3% growth rate reported last month to indicate growth a a 0.6% rate with this estimate…that growth figure was arrived at by deflating the 3.0% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated  consumer inflation at a 2.4% annual rate in the 1st quarter, which was also unrevised from a month ago...real consumption of durable goods fell at a 1.4% annual rate, which was revised from the 2.5% drop shown in the advance report, and subtracted 0.11 percentage points from GDP, as a drop in consumption of automobiles at a 13.9% rate more than offset increases in real consumption of furniture, appliances and recreational goods and vehicles....real consumption of nondurable goods by individuals rose at a 1.2% annual rate, revised from the 1.5% increase reported in the 1st estimate, and added 0.18 percentage points to 1st quarter economic growth, as higher consumption of food and most other non-durables was partially offset by decreases in consumption of clothing and energy….at the same time, consumption of services rose at a 0.8% annual rate, revised from the 0.4% growth rate reported last month, and added 0.37 percentage points to the final GDP tally, as a 1.5% decrease in the growth rate in real consumption of housing and utilities offset real growth in other services....

in addition, seasonally adjusted real gross private domestic investment grew at a 4.8% annual rate in the 1st quarter, revised from the 4.3% growth estimate reported last month, as real private fixed investment grew at a 11.9% rate, rather than at the 10.4% rate reported in the advance estimate, while the contraction in inventory growth was somewhat larger than previously estimated...real investment in non-residential structures was revised from growth at a 22.1% rate to growth at a 28.4% rate, while real investment in equipment was revised to show growth at a 7.2% rate, down from the 9.1% growth rate previously reported...at the same time, the quarter's investment in intellectual property products was revised from growth at a 2.0% rate to growing at a 6.7% rate...meanwhile, the growth rate of residential investment was revised slightly higher, from 13.7% to 13.8% annually…after those revisions, the increase in investment in non-residential structures added 0.69 percentage points to the 1st quarter's growth rate, the increase in investment in equipment added 0.39 percentage points to the quarter's growth, greater investment in intellectual property added 0.27 percentage points, while growth in residential investment added 0.50 percentage points to the increase in 1st quarter GDP...

meanwhile, the growth in real private inventories was revised from the originally reported $10.3 billion in inflation adjusted dollars to show inventory grew at an inflation adjusted $4.3 billion rate...this came after inventories had grown at an inflation adjusted $49.6 billion rate in the 4th quarter, and hence the $45.3 billion smaller real inventory growth than in the 4th quarter subtracted 1.07 percentage points from the 1st quarter's growth rate, revised from the 0.93 percentage point subtraction due to slower inventory growth shown in the advance estimate....however, since slower growth in inventories indicates that less of the goods produced during the quarter were left "sitting on the shelf”, that decrease by $45.3 billion meant that real final sales of GDP were actually greater by that much, and therefore the BEA finds that real final sales of GDP rose at a 2.2% rate in the 1st quarter, revised from 1.6% rate shown in the advance estimate...

the previously reported increase in real exports was little changed with this estimate, while the previously reported increase in real imports was revised lower, and as a result our net trade was a slightly larger addition to GDP rather than was previously reported...our real exports grew at a 5.8% rate, unrevised from 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 increase added 0.69 percentage points to the 1st quarter's growth rate....meanwhile, the previously reported 4.1% increase in our real imports was revised to a 3.8% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, that increase subtracted 0.55 percentage points from 1st quarter GDP....thus, our improving trade balance added a net 0.13% (rounded down) percentage points to 1st quarter GDP, rather than the 0.07% percentage point addition resulting from our improving foreign trade balance that was indicated in the advance estimate..

finally, there was also an upward revision to real government consumption and investment in this 2nd estimate, as the entire government sector shrunk at a 1.1% rate, revised from the 1.7% shrinkage of government indicated by the 1st estimate....real federal government consumption and investment was seen to have shrunk at a 2.0% rate from the 4th quarter in this estimate, which was revised from the 1.9% rate shown in the 1st estimate...real federal outlays for defense were revised to show shrinkage at a 3.9% rate, less than the 4.0% rate previously reported, but still subtracting 0.16% percentage points from 1st quarter GDP, while all other federal consumption and investment grew at a 0.7% rate, rather than the 0.9% growth rate previously reported, and added 0.02 percentage points to GDP, revised from the 0.03 percentage point addition shown last month...note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services...meanwhile, real state and local consumption and investment contracted at a 0.6% rate in the quarter, which was revised from the 1.6% shrinkage shown in the 1st estimate, and subtracted 0.06 percentage points from 1st quarter GDP, as real growth in state and local consumption expenditures added 0.06 percentage points, while real state and local investment shrunk at a 6.4% rate subtracted 0.12 percentage points from the quarter's growth...

April Durable Goods: New Orders Down 0.7%, Shipments Down 0.3%, Inventories Up 0.1%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for April (pdf) from the Census Bureau reported that the widely watched new orders for manufactured durable goods fell by $1.6 billion or 0.7 percent to $231.2 billion in April, the first decrease in five months...durable goods orders for March were revised to show a 2.3% increase to $232.7 billion, revised from the 0.7% increase to $238.7 billion reported a month ago, as there was an intervening benchmark revision on May 18th that revised all previously published factory data back to 2002...as is usually the case, the volatile monthly change in new orders for transportation equipment led the April headline change, as those transportation equipment orders fell $1.0 billion or 1.2 percent to $78.5 billion, on a 9.2% decrease to $11,482 million in new orders for commercial aircraft....excluding new orders for transportation equipment, other new orders were still down 0.4% in April, while the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, were virtually unchanged at $62,855 million...

the seasonally adjusted value of April's shipments of durable goods, which will be inputs into various components of 2nd quarter GDP after adjusting for changes in prices, fell by $0.7 billion or 0.3  percent to $232.4 billion, after March shipments were revised from a increase of 0.2% to a decrease of 0.1%...again, shipments of transportation equipment led the change, as they fell $0.6 billion or 0.5 percent to $77.2 billion, as the value of shipments of commercial aircraft fell 3.0% to $11,247 million; excluding that volatile sector, the value of other shipments of durable goods fell 0.2%, but are still 3.4% higher year to date than a year ago....meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 9th time in 10 months, increasing by $0.6 billion or 0.1 percent to $394.2 billion, after the value of March inventories was revised from $648.3 billion to $648.5 billion, now a 0.2% increase from February...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose for the third time in four months, increasing by $2.4 billion or 0.2 percent to $1,122.9 billion, following a March report which was revised from a 0.2% increase to one of 0.3%...a $1.3 billion or 0.2 percent increase to $766.6 billion in unfilled orders for transportation equipment was responsible for more than half of the aggregate increase, even as unfilled orders excluding transportation equipment rose 0.3% to $356,327 million....compared to a year ago, the unfilled order book for durable goods is still 1.2% below the level of last April, with unfilled orders for transportation equipment 3.1% below their year ago level, on a 4.0% decrease in the backlog of orders for commercial aircraft...

New Home Sales Fall in April

the Census report on New Residential Sales for March (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 569,000 homes annually during the month, which was 11.4 percent (±10.5 percent) below the revised March annual rate of 642,000 new home sales, but still 0.5 percent (±11.3 percent)* above the estimated annual rate that new homes were selling at in April of last year....the asterisk indicates that based on their small sampling, Census could not tell whether April new home sales rose or fell from those in April a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales of new single family homes in March were revised from the annual rate of 621,000 reported last month to an annual rate of 642,000, while sales in February, initially reported at an annual rate of 592,000 and revised to a 587,000 rate last month, were revised to an annual rate of 602,000, and new home sales in January, initially reported at an annual rate of 555,000 and revised from a 558,000 rate to a 585,000 rate last month, were again revised higher to a 599,000 a year rate with this release...

the annual rates of sales reported here are seasonally adjusted and extrapolated from the estimates of canvassing Census field reps, which indicated that approximately 55,000 new single family homes sold in April, down from the estimated 61,000 new homes that sold in March but up from the 50,000 new homes that sold in February and from the 45,000 that sold in January .....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in April was $309,200, down from the median sale price of $318,700 in March and down from the median sales price of $321,3004 in April a year ago, while the average new home sales price was at $368,300, down from the $385,400 average sales price in March, and down from the average sales price of $380,000 in April a year ago....a seasonally adjusted estimate of 268,000 new single family houses remained for sale at the end of April, which represents a 5.7 month supply at the April sales rate, up from the 4.9 months of new home supply now reported for March...

for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales decrease to 569,000 Annual Rate in April and A few Comments on April New Home Sales...

Existing Home Sales 2.3% Lower in April

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell at a 2.3% rate from March to April, projecting that 5.57 million existing homes would sell over an entire year if the April home sales pace were extrapolated over that year, a pace that was still 1.6% above the annual sales rate projected in April of a year ago....the NAR also reported that the median sales price for all existing-home types was $244,800 in April, 6.0% higher than in April a year earlier, which they report as "the 62nd consecutive month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Slip 2.3 Percent in April", 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 usually look at the raw data overview (pdf) to see what actually happened during the month...this unadjusted data indicates that roughly 449,000 homes sold in April, down 1.3% from the downwardly revised 455,000 homes that sold in March, and down by 4.3% from the 470,000 homes that sold in April of last year...that same pdf indicates that the median home selling price for all housing types rose by 3.5%, from a revised $236,600 in March to $244,800 in April, while the average home sales price rose 3.2% to $287,500, from the $278,700 average sales price in March, while it was up 5.1% from the $273,600 average April home sales price of a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: "Existing-Home Sales Slip 2.3 Percent in April" and A Few Comments on April 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…)

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