Sunday, June 25, 2017

May's new and existing home sales

the only widely watched reports released over the past week were the May report on new home sales from the Census bureau and the May report on existing home sales from the National Association of Realtors (NAR)....in addition, this week also saw the release of the Kansas City Fed manufacturing survey for June, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico…they reported their broadest composite index rose to +11 in June, up from +8 in May and +7 in April, suggesting a steady expansion of manufacturing in the 10th District...

May’s New Homes Sales and Prices Might Have Been Higher Than April’s

the Census report on New Residential Sales for May (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 610,000 homes annually during the month, which was 2.9 percent (±13.0 percent)* above the revised April rate of 593,000 new single family homes a year and 8.9 percent (±21.9 percent)* above the estimated annual rate that new homes were selling at in May of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether May new home sales rose or fell from those of April or even from those in May 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....hence, these initial new home sales reports are not very reliable and often see significant revisions...with this report; sales new single family homes in April were revised from the annual rate of 569,000 reported last month to a 593,000 a year rate, March's annualized home sale rate, initially reported at 621,000, was revised from last months upward revision of 642,000 to 644,000, while the annual rate of February's sales, revised from 592,000 to an annual rate of 587,000 last month, were again revised higher, to an annual rate of 615,000...

the annual rates of sales reported here are extrapolated from the estimates of canvassing Census field reps, which indicated that approximately 58,000 new single family homes sold in May, up from the 57,000 new homes that sold in April, but down from the 61,000 new homes that sold in March....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in May was a record $345,800, up from the median sales price of $310,200 in April, while the average May new home sales price was $406,400, also a record high, up from a $367,700 average in April, and up from the average sales price of $350,000 in May a year ago....a seasonally adjusted estimate of 268,000 new single family houses remained for sale at the end of May, which represents a 5.3 month supply at the May sales rate, down from a 5.7 month supply in April....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales increase to 610,000 Annual Rate in May and A few Comments on May New Home Sales...

Existing Home Sales Rose 1.1% in May

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales rose by 1.1% from April to May, projecting that 5.62 million homes would sell over an entire year if the May home sales pace were extrapolated over that year, a pace that was also 2.7% greater than the annual sales rate projected in May of a year ago...that came after an annual sales rate of 5.56 million homes in April, which was revised from the originally reported 5.57 million annual sales rate, and an annual home sales rate of 5.70 million in March...the NAR also reported that the median sales price for all existing-home types in May was $252,800, which topped the prior record $247,600 median price set last June and was 5.8% higher than a year earlier, which they report is "the 63rd straight month of year-over-year gains"......the NAR press release, which is titled Existing-Home Sales Rise 1.1 Percent in May; Median Sales Price Ascends to New High, 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), which gives us a close approximation to the actual number of homes that sold each month...this data indicates that roughly 555,000 homes sold in May, up by 24.2% from the 447,000 homes that sold in April and 5.7% more than the 525,000 homes that sold in May of last year, so we can see there was again a seasonal adjustment in the annualized published figures of over 23% to correct for the typical springtime increase in home sales...that same pdf indicates that the median home selling price for all housing types rose 3.2%, from a revised $245,000 in April to $252,800 in May, while the average home sales price was $294,600, up 2.4% from the $287,800 average in April, and up 4.9% from the $280,900 average home sales price of May a year ago, with the regional average home sales prices ranging from a low of $235,100 in the Midwest to a high of $389,700 in the West...for additional coverage with long term graphs on this report, see "NAR: "Existing-Home Sales Rise 1.1 Percent in May"" and "A Few Comments on May Existing Home Sales" from Bill McBride at Calculated Risk...

 

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

Sunday, June 18, 2017

May’s retail sales, consumer and producer prices, industrial production, home construction; April’s business inventories

major reports released during the past week included Retail Sales for May and Business Sales and Inventories for April, both released by the Census bureau, the May Consumer Price Index, the May Producer Price Index, and the May Import-Export Price Index, all from the Bureau of Labor Statistics, the report on Industrial Production and Capacity Utilization for May from the Fed, and the May report on New Residential Construction from the Census Bureau...in addition, this week also saw the release of the Regional and State Employment and Unemployment for May from the BLS, and the release of the first two regional Fed manufacturing indexes for June: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from -1.0 in May to + 19.8 in June, suggesting a return to expansion in First District manufacturing after an anomalous slow month, and the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions fell from +38.8 in May to +27.6 in June, still suggesting an ongoing robust expansion in that region's manufacturing...

Consumer Price Index Down 0.1% in May on Lower Energy Costs

the consumer price index was 0.1% lower in May, as a drop in the price of gasoline and core commodities more than offset modestly higher priced food and rent...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices fell 0.1% in May after rising 0.2% in April but after falling 0.3% in March....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually rose from 244.524 in April to 244.733 in May, which left it statistically 1.875% higher than the 240.229 index reading in May of last year...with lower prices for energy a major reason for the decrease in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index rising from 251.642 to 251.835, which left the core index 1.733% ahead of its year ago reading of 247.544...

the volatile seasonally adjusted energy price index decreased by 2.7% in May, after it had risen 1.1% in April, fallen by 3.2% in March and by 1.0% in February, but after it had risen by 4.0% in January, 1.5% in December, 1.2% in November, 3.5% in October, and by 2.9% in September...thus, energy prices are still averaging 5.4% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were 6.2% lower in May, while the index for energy services rose by 0.7%, after rising 0.9% in April....the decrease in the energy commodity index included a 6.4% drop in the price of gasoline, the largest component, and a 2.8% seasonally adjusted decrease in the index for fuel oil, even as the underlying price of fuel oil only fell 0.8% on an unadjusted basis…within energy services, the index for utility gas service rose by 1.9% after rising by 2.2% in April, and hence utility gas is now priced 12.8% higher than it was a year ago, while the electricity price index was up 0.3%, after it rose 0.6% in April....energy commodities are still priced 6.1% above their year ago levels, with gasoline prices averaging 5.9% higher than they were a year ago, while the energy services price index is 4.8% higher than last May, as even electricity prices have increased by 2.7% over that period…

the seasonally adjusted food price index rose 0.2% in May, after rising 0.2% in April, 0.3% in March, 0.2% in February, and 0.1% in January, but after being unchanged in each of the prior 6 months, as prices for food purchased for use at home rose 0.1% in May while prices for food bought to eat away from home rose 0.2%, with average prices at fast food outlets and at full service restaurants both 0.2% higher...in the food at home categories, the price index for cereals and bakery products increased by 0.3% as prices for flour and mixes were 0.9% higher...the price index for the meats, poultry, fish, and eggs group was also up 0.3% as fresh chicken prices rose 1.9%, and fish and seafood prices rose 1.7%, while the index for dairy products was also 0.3% higher on 1.8% increase in the price of ice cream....the fruits and vegetables index, on the other hand, was 0.6% lower on a 1.5% decrease in prices for fresh fruits and 0.8% decreases for both canned and frozen fruits and vegetables....the beverages index was 0.1% higher as noncarbonated juices and drink prices rose 0.9%....lastly, prices in the ‘other foods at home’ category were on average 0.1% lower, even as sugar prices rose 2.2% and salad dressings rose 2.3%.....among food at home line items, only eggs, which are still priced 14.5% lower than a year ago, have seen 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 0.1% in both May and in April after falling by 0.1% in March but after rising by 0.2% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.1% in September, 0.3% in August, 0.1% in July and by 0.2% last April, May and June, the composite of all goods less food and energy goods was down 0.3% in May, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust May retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.2%, as the index for window and floor coverings fell 2.6%...the apparel price index was also 0.2% lower, led by a 1.5% decrease in prices for women's apparel....prices for transportation commodities other than fuel were also down 0.2%, as prices for new vehicles fell 0.2% and prices for used cars and trucks also fell 0.2%...on the other hand, prices for medical care commodities were 0.4% higher on a 0.7% increase in prices for medical equipment and supplies....but the recreational commodities index also fell 0.2% on 3.8% lower prices for audio equipment, while the education and communication commodities index was 0.5% lower on a 0.9% decrease in prices for college textbooks and a 1.3% decrease in prices for telephone hardware...lastly, a separate price index for alcoholic beverages was up 0.3%, while the price index for ‘other goods’ was down 0.1% on a 0.5% decrease in the index for personal care products...

within core services, the price index for shelter rose 0.2% on a 0.2% increase in rents, a 0.2% increase in homeowner's equivalent rent, and a 0.5% increase in the household operations services index....the index for medical care services was down 0.1% as prices for health insurance and physicians services both fell 0.2%...meanwhile, the transportation services index was 0.3% higher on a 2.3% increase in car and truck rental and a 1.1% increase in vehicle insurance...the recreation services price index was up 0.1% on a 0.6% hike in cable and satellite television service, while the index for education and communication services was unchanged as elementary and high school tuition and fees rose 0.4% and delivery services were 0.6% lower...lastly, the index for other personal services was unchanged as tax preparation services rose 0.3% and legal services were 0.3% lower...among core prices, only televisions, which are still 16.0% cheaper than a year ago, and wireless phone services, which have now dropped 12.5% from a year ago, have seen prices drop by more than 10% over the past year, while nothing has seen prices rise by a double digit magnitude.. 

May Retail Sales Down 0.3%,  Mostly on Lower Prices

seasonally adjusted retail sales fell 0.3% in May after retail sales for April rose 0.4%....the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $473.8 billion for the month, which was an decrease of 0.3 percent (±0.5%)* from April's revised sales of $475.0 billion but still 3.8 percent (±0.7%) above the adjusted sales of May of last year...April's seasonally adjusted sales were revised from the $475.0 billion originally reported to $474.9 billion, while March sales were also revised a bit lower, from $473.1 billion to $473.0 billion, with this report....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales rose 6.0%, from $467,843 million in April to $495,814 million in May, while they were up 5.2% from the $471,434 million of sales in May a year ago...

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

May 2017 retail sales table

as we saw in our review of the consumer price index, the composite price index for all goods less food and energy goods was down 0.3% in May, which suggests that real retail sales will be close to unchanged month over month, not likely positive, but certainly not as bad as the headlines look...for instance, sales at car dealers were down 0.2% while prices of new and used cars were both down 0.2%, which suggests unit sales of vehicles were close to flat...in a similar manner, grocery store sales, nominally up 0.1% in May, were also really unchanged when the 0.1% increase in prices is applied to that increase in dollar sales...also note that the 2.4% drop in sales at gas stations was entirely due to the 6.4% drop in the price of gasoline; and hence real gas station sales were likely higher...so we don't expect this report to reflect much of a downturn, if any, in real personal consumption expenditures of goods for May, when the BEA computes those figures in the Income and Outlays report scheduled for release two weeks from now...

Producer Prices Flat in May as Increases in Margins for Services Offset Lower Wholesale Energy Prices

the seasonally adjusted Producer Price Index (PPI) for final demand was unchanged in May, as prices for finished wholesale goods decreased 0.5%, while margins of final services providers increased by 0.3%...this followed an April report that indicated the PPI was 0.5% higher, with prices for finished wholesale goods up 0.5%, while margins of final services providers increased by 0.4%, and a March report that indicated the PPI was 0.1% lower, with prices for finished wholesale goods down 0.1%, while margins of final services providers also decreased by 0.1%....on an unadjusted basis, producer prices are now 2.4% higher than a year earlier, down from the 2.5% YoY increase indicated a month ago, which had been the largest year over year increase in the PPI since February 2012...

as noted, the price index for final demand for goods, aka 'finished goods', fell by 0.5% in May, after rising by 0.5% in April, falling by 0.1% in March, and rising by 0.3% in February, 1.0% in January, 0.6% in December, 0.1% in November, 0.3% in October, and 0.5% in September.. the index for wholesale energy prices fell 3.0%, the price index for wholesale foods fell 0.2%, while the index for final demand for core wholesale goods (ex food and energy) rose 0.1%...the largest wholesale energy price change was a 11.2% decrease in wholesale prices for gasoline, while the wholesale food price index moved down on decreases of 12.3% for fresh fruits and of 16.9% for fresh and dry vegetables....among wholesale core goods, prices for tires increased 2.1%, while the index for pharmaceutical preparations moved up 0.6%…

at the same time, the index for final demand for services rose by 0.3% in May, after rising by 0.4% in April, falling by 0.1% in March but after after rising by a revised 0.2% in February, and by 0.4% in January, as the index for final demand for trade services was up 1.1%, while the index for final demand for transportation and warehousing services fell 0.5%, and the index for final demand for services less trade, transportation, and warehousing services was 0.1% lower....among trade services, seasonally adjusted margins for major fuels and lubricants retailers increased 16.1% while margins for hardware, building materials, and supplies retailers rose 2.8%...among transportation and warehousing services, margins for airline passenger services were 2.1% lower...in the core final demand for services index, margins for passenger car rental rose 4.7% and margins for arrangement of vehicle rentals and lodging fell 6.3%..

this report also showed the price index for processed goods for intermediate demand was 0.1% higher, after rising 0.5% in April, 0.1% in March, and by a revised 0.3% in February and 1.2% in January....the price index for intermediate energy goods fell 0.3%, while prices for intermediate processed foods and feeds rose 0.5%, and the core price index for processed goods for intermediate demand less food and energy was 0.2% higher...prices for intermediate processed goods are now 4.8% higher than in May a year ago, now the seventh consecutive year over year increase, after 16 months of lower year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

meanwhile, the price index for intermediate unprocessed goods fell 3.0% in May, after rising 3.3% in April, falling 4.2% in March and 0.2% in February, but after rising 4.0% in January and 7.3% in December...the index for crude energy goods fell 9.3%, as crude oil prices fell 19.3%, while the price index for unprocessed foodstuffs and feedstuffs rose 1.8%, as the index for slaughtered steers and heifers jumped 9.1%...in addition, the index for core raw materials other than food and energy materials fell 0.7%, as wholesale prices for iron and steel scrap fell 2.3% and wholesale prices for paper scrap fell 8.5% ... this raw materials index is now up just 7.5% from year ago, in contrast to the year over year increase of 19.3% that we saw in February, just 3 months ago..

lastly, the price index for services for intermediate demand was unchanged in May, after being 0.9% higher in April, 0.2% lower in March, and a revised 0.4% higher in February and in January.. the index for trade services for intermediate demand was 1.1% higher, as margins for paper and plastics products wholesalers rose 5.4 percent…the index for transportation and warehousing services for intermediate demand was down 0.1%, as intermediate prices for air transportation of passengers fell 2.1%...meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.3% lower, as margins for intermediate services related to securities brokerage and dealing fell 4.5%...over the 12 months ended in May, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.8% higher than it was a year ago...  

Industrial Production Unchanged in May; Capacity Utilization Down 0.1%

May saw a pullback in durable goods manufacturing, after April saw the largest increase in 26 months, and hence the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production was unchanged in May after rising by a revised 1.1% in April...industrial production remains 2.2% higher than a year ago, also unchanged from last month's figure...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was unchanged at 105.0 in May, after April's index was revised down from the originally reported at 105.1...at the same time, the March reading for the index was revised down from 104.1 to 103.9, while the prior months remain statistically unchanged from previously reported figures.....the average of the April and May production indexes is still more than 1.2% above the average of the 1st quarter months, so to the extent that this report plays into GDP, this report suggests a net addition to GDP of that magnitude in the components that this report influences...

the manufacturing index, which accounts for more than 77% of the total IP index, decreased by 0.4, from 103.7 in April to 103.3 in May, after the manufacturing index for April was revised down from 103.8, the manufacturing index for March was revised down from 102.8 to 102.6, and the manufacturing index for February was revised up from 103.2 to 103.4...the May decrease was driven by a 2.0% pullback in the production of motor vehicle assemblies, which had risen 6.5% in April.... meanwhile, the mining index, which includes oil and gas well drilling, increased for the 4th time in 5 months, as it rose from 108.0 in April to 109.7 in May, and is now 8.3% higher than it was a year ago....finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, rose 0.4% in May after increasing a revised 0.7% in April, as the utility index rose from 102.2 in April to 102.6 in May and hence is now 0.1% above it's year earlier level...

this report also includes capacity utilization figures, which are expressed as the percentage of our  plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry slipped to 76.6% in May from 76.7% in April, with April's figure unrevised....capacity utilization for all manufacturing industries fell from a downwardly revised 75.8% in April to 75.5 in May, as utilization of NAICS durable goods production facilities fell from 75.4% in April to 74.7% in May, while capacity utilization for non-durables rose from 77.3% to 77.4%....capacity utilization for the mining sector rose to 84.3% in May, from 83.2% in April, which was originally published as 8.3%, while utilities were operating at 76.6% of capacity during May, up from the revised 76.3% of capacity during April, which was the same as was originally reported....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.... 

April Business Sales Flat%, Business Inventories Down 0.2%

following the release of the May retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for April (pdf), which incorporates the revised April retail data from that May report and earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,352.0 billion in April, virtually unchanged (±0.2 percent)* from March revised sales, but up 5.6 percent (±0.3 percent) from April sales of a year earlier...note that total March sales were revised from the originally reported $1,361.0 billion to $1,351.9 billion....manufacturer's sales were statistically unchanged from March at $470,833 million in April, and retail trade sales, which exclude restaurant & bar sales from the revised April retail sales reported earlier, rose 0.5% to $418,865 million, while wholesale sales fell 0.4% to $462,344 million..

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,854.2 billion at the end of April, down 0.2 percent (±0.1%) from March, but 1.0 percent (±0.4%) higher than in April a year earlier...the value of end of March inventories was revised from the $1,840.8 billion reported last month to $1,858.3 billion with this release, implying a large upward revision to 1st quarter GDP...seasonally adjusted inventories of manufacturers were estimated to be valued at $649,700 million, 0.1% higher than in March, inventories of retailers were valued at $613,545 million, 0.2% less than in March, while inventories of wholesalers were estimated to be valued at $590,976 million at the end of April, down 0.5% from March...all categories of business inventories are adjusted for price changes for national accounts data using appropriate price index components from the producer price index...since April producer prices averaged a 0.5% increase, real business inventories for April will thus be lower than the end of the 1st quarter by an average of 0.7%, which would be a major negative for 2nd quarter GDP,  if that’s not changed by real increases during May or June...

New Housing Construction, Permits Reported Down in May

the May report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started was at a seasonally adjusted annual rate of 1,092,000, which was 5.5 percent (±11.9 percent)* below the revised April estimated annual rate of 1,156,000 housing units started, and was 2.4 percent (±11.4 percent)* below last May's rate of 1,119,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, May housing starts could have been up by 6.4% or down by as much as 17.4% from those of April, with even larger revisions possible...in this report, the annual rate for April housing starts was revised from the 1,172,000 reported last month to 1,156,000, while March starts, which were first reported at a 1,215,000 annual rate, were revised from last month's initial revised figure of 1,203,000 annually down to 1,189,000 annually with this report....these annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 102,300 housing units were started in May, down from the 105,700 units started in April...of those housing units started in May, an estimated 76,800 were single family homes and 24,300 were units in structures with more than 5 units, down from the revised 77,300 single family starts and 27,100 units started in structures with more than 5 units in April...

the monthly data on new building permits, with a smaller margin of error and hence smaller revisions, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in May, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,168,000 housing units, which was 4.9 percent (±0.9 percent) below the revised April permit rate of 1,228,000 and 0.8 percent (±1.1%) below the rate of permit issuance in May a year earlier...the annual rate for housing permits issued in April was revised from 1,229,000 to 1,228,000..quoting the report on the types of permits: Single-family authorizations in May were at a rate of 779,000; this is 1.9 percent (±1.0 percent) below the revised April figure of 794,000. Authorizations of units in buildings with five units or more were at a rate of 358,000 in May.....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 112,900 housing units were issued in May, up from the revised estimate of 102,600 new permits issued in April... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.092 Million Annual Rate in May and Comments on May Housing Starts...

 

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

Sunday, June 11, 2017

April’s factory inventories, wholesale sales, and job openings reports, et al

monthly agency reports released this week included the Full Report on Manufacturers' Shipments, Inventories and Orders for April and the April report on Wholesale Trade, Sales and Inventories, both from the Census Bureau, the Job Openings and Labor Turnover Survey (JOLTS) for April from the Bureau of Labor Statistics, and the Consumer Credit Report for April from the Fed...the latter showed that overall consumer credit, a measure of non-real estate personal debt, expanded by a seasonally adjusted $8.1 billion, or at a 2.6% annual rate, as non-revolving credit expanded at a 2.9% rate to $2810.4 billion and revolving credit outstanding rose at a 1.8% rate to $1010.6 billion...April's increase represented the slowest monthly consumer credit growth rate since August 2011, but since last April's increase was previously the lowest in over two years, it's possible the seasonal adjustment for the month has gone awry….

the Fed also released the 1st Quarter Flow of Funds report, a 198 page pdf report that tracks the flow of money throughout the economy as it moves between households, businesses, and government, and which is usually reported on for household net worth, which tends to fluctuate with the stock market and the value of homes, as measured by the CoreLogic Home Price Index…this week's report showed that household net worth rose from $92.5 trillion in the 4th quarter of 2015 to a record $94.8 trillion in the 1st quarter of 2017, as the value of real estate owned by households rose by $500 billion to $23.5 trillion while the value of corporate stock owned by households increased by $1.3 trillion….the week also saw the release of the Mortgage Monitor for April (pdf) from Black Knight Financial Services; in a report focusing on new mortgage originations in the first quarter, BKFS also reported that 4.08% of mortgages were delinquent in April, up from the 12 year low of 3.62% delinquent in March, but down from 4.24% delinquency rate in April 2016, and that 0.85% of mortgages remained in the foreclosure process in April, down from 0.88% of all mortgages in March and down from 1.17% a year ago...

Factory Shipments Flat in April, Factory Inventories Up 0.1%

the April Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $0.8 billion or 0.2 percent to $469.0 billion in April, following an increase of 1.0% in March, which was revised from the 0.2% increase to $478.2 billion reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the April advance report on durable goods we reported on two weeks ago...this report now shows that new orders for manufactured durable goods fell by $1.8 billion or 0.8 percent to $231.0 billion in March, revised from the 0.7% decrease to $231.2 billion figure that was published two weeks ago....

this report also indicated that the seasonally adjusted value of April factory shipments rose for the 4th time in 5 months, but increased by just $0.1 billion to $470.8 billion, following a 0.2 percent decrease in March, which had previously been reported as an 0.1% decrease...shipments of durable goods were down by $0.9 billion or 0.4 percent to $232.8 billion, revised from the 0.3% decrease that was reported in the advance report...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods rose by $1.0 billion or 0.4 percent to $238.0 billion, as a 1.1% increase in the value of food products shipments led the increase...

meanwhile, the aggregate value of April factory inventories rose for the 6th consecutive month, increasing by $0.5 billion or 0.1 percent to $649.7 billion, following a March increase of 0.2%....inventories of durable goods increased $0.7 billion or 0.2 percent to $394.6 billion, revised from the $0.5 billion 0.1% increase that was reported two weeks ago....the value of non-durable goods' inventories decreased $0.2 billion or 0.1 percent to $255.1 billion, following a statistically insignificant decrease in March....

to gauge the effect of these April factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories fell by 0.2% to $228,069 million; the value of work in process inventories was down 0.3% to $199,800 million, and materials and supplies inventories were valued 0.7% higher at $221,831 million...the April producer price index reported that prices for finished goods increased 0.5%, prices for intermediate processed goods were also 0.5% higher, while prices for unprocessed goods were 3.3% higher....assuming similar valuations for inventories, that would suggest that April's real finished goods inventories were roughly 0.7% lower, real inventories of intermediate processed goods were 0.8% lower, and real raw material inventory inventories were 2.6% lower.. 

April Wholesale Sales Down 0.4%, Wholesale Inventories Down 0.5%

the April report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $462.3 billion, down 0.4 percent (+/-0.5%) from the revised March level, but still up 7.3% percent (+/-0.9%) from wholesale sales of April 2016... the March preliminary estimate was revised down $0.8 billion or nearly 0.2% from the $465.5 level reported last month... April wholesale sales of durable goods were up 0.3 percent from last month and were up 7.3 percent (+/-1.8%)* from a year earlier, while wholesale sales of nondurable goods were down 1.1% from March but were up 7.3 percent from last April, with wholesale sales of farm products down 5.6% on lower prices...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 on the shelf represent goods that were produced but not sold, and this April report estimated that wholesale inventories were valued at a seasonally adjusted $591.0 billion at month end, a decrease of 0.5 percent (+/-0.2%) from the revised March level but 1.1 percent (+/-1.1%)* higher than in April a year ago, with the March preliminary estimate revised down $0.5 billion, or about 0.1%, at the same time....inventories of durable goods were down 0.3% from March, but up 2.0 percent from a year earlier, while the value of wholesale inventories of nondurable goods were down 0.8% from March but were up 1.1 percent from last April, as the value of inventories of raw farm products inventories fell 2.4%...the downward revision to March wholesale inventories implies an downward revision of about 0.02 percentage points to 1st quarter GDP, while April wholesale inventories, after an adjustment for price increases for all categories of wholesale goods except raw farm goods, as indicated by the components of the April producer price index, indicates a real inventory decrease in the 2nd quarter as well...

Job Openings at a Record High in April; Hiring, Firing, and Job Quitting All Down

the Job Openings and Labor Turnover Survey (JOLTS) report for April from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 259,000, from 5,785,000 in March to a record high of 6,044,000 job openings in April, after March job openings were revised higher, from 5,743,000 to 5,785,000...April’s jobs openings were also 7.1% higher than the 5,643,000 job openings reported in April a year ago, as the job opening ratio expressed as a percentage of the employed rose to 4.0% in April from 3.8% in March, which was also up from 3.8% a year ago...the greatest increase in job openings was in the accommodation and food services category, where openings rose by 118,000 to 775,000, while job openings in professional and business services fell by 18,000 to 1,134,000 ...(details on job openings by industry and region can be viewed in Table 1)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked to at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in April, seasonally adjusted new hires totaled 5,051,000, down by 253,000 from the revised 5,304,000 who were hired or rehired in March, as the hiring rate as a percentage of all employed fell from 3.6% to 3.5%, the same as the hiring rate in April a year earlier (details of hiring by industry since December are in table 2)....meanwhile, total separations also fell, by 225,000, from 5,198,000 in March to 4,973,000 in April, as the separations rate as a percentage of the employed fell from 3.6% to 3.4%, which was also the same separations rate as in April a year ago (see table 3)...subtracting the 4,973,000 total separations from the total hires of 5,051,000 would imply an increase of 78,000 jobs in April, quite a bit less than the revised payroll job increase of 174,000 for April reported by the May establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings... 

breaking down the seasonally adjusted job separations, the BLS finds that 3,027,000 of us voluntarily quit their jobs in April, down by 111,000 from the revised 3,138,000 who quit their jobs in March, while the quits rate, widely watched as an indicator of worker confidence, slipped from 2.2% to 2.1% of total employment, which was still up from 2.0% a year earlier (see details in table 4)....in addition to those who quit, another 1,590,000 were either laid off, fired or otherwise discharged in April, down by 71,000 from the revised 1,661,000 who were discharged in March, as the discharges rate was unchanged at 1.1% of all those who were employed during the month, but also down from 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 357,000 in April, down from 399,000 in March, for an 'other separations' rate of 0.2%, which was down from 0.3% in both March and in April a year ago....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...

 

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

Sunday, June 4, 2017

May's job report; April’s personal income and outlays, trade deficit, and construction spending, et al

in addition to the Employment Situation Summary for May from the Bureau of Labor Statistics, this week also saw the release of three reports for April that give us a major share of that month's contribution to 2nd quarter GDP, and in some cases suggest revisions to 1st quarter GDP....those reports were the April report on Personal Income and Spending from the Bureau of Economic Analysis, the Commerce Dept report on our International Trade for April, and the April report on Construction Spending (pdf), from the Census Bureau...other regular reports issued this week included the report on light vehicle sales for May from Wards Automotive, which estimated that vehicles sold at a 16.58 million annual rate in May, down from the 16.81 million annual pace in April, and down from 17.37 million rate reported in May of 2016, and the March Case-Shiller Home Price Index, which is a relative average of January, February & March home prices; Case Shiller reported that home prices nationally for those 3 months averaged 5.8% higher than prices for the same homes that sold during the same 3 month period a year earlier...among the diffusion indexes released this week were the Dallas Fed Texas Manufacturing Outlook Survey, which indicated its general business activity index rose to 17.2, up slightly from 16.8 in April, still indicating an ongoing expansion in the Texas economy, and the May Manufacturing Report On Business from the Institute for Supply Management (ISM) which indicated that the manufacturing PMI (Purchasing Managers Index) increased from 54.8% in April to 54.9% in May, which still suggests a modest expansion in manufacturing firms nationally...

Employers Add 138,000 Jobs in May, Employment and Participation Rates Drop

the Employment Situation Summary for May indicated anemic payroll job growth, while the employment rate again fell even as the labor force participation rate dropped…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 138,000 jobs in May, after the previously estimated payroll job increase for March was revised down from 79,000 to 50,000, while the payroll jobs increase for April was revised down from 211,000 to 174,000…that means that this report represents just 72,000 more seasonally adjusted payroll jobs than were reported last month, less than half the past year's average of 189,000 jobs per month...the unadjusted data shows that there were actually 810,000 more payroll jobs extant in May than in April, as typical seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were normalized by the seasonal adjustments…

seasonally adjusted job increases were spread through throughout the private goods producing and service sectors, while the government sector lost 9,000 jobs , and both retail and wholesale trade also saw modest job losses....the broad professional and business services sector added 38,000 jobs, as 14,200 more found work with employment services....employment in health care and social assistance rose by 32,300, with the addition of 7,400 jobs in hospitals......the leisure and hospitality sector added 31,000 jobs, with the addition of 33,000 more jobs in bars and restaurants...there were also 11,000 more jobs than normal in construction, with the addition of 7,400 more workers by heavy and civil engineering construction firms...meanwhile, the other major sectors, including manufacturing, mining, transportation and warehousing, utilities, information, finance and private education, all saw little or no increases in payroll employment over the month…

at the same time, the seasonally adjusted extrapolation from the April household survey estimated that the count of those employed fell by an estimated 233,000 to 152,923,000, while the similarly estimated number of those unemployed fell by 195,000 to 6,861,000; which meant that May saw a net decrease of 429,000 in the total labor force...since the working age population had also grown by 179,000 over the same period, that meant the number of employment aged individuals who were not counted as being in the labor force rose by 608,000 to 94,983,000....the large decrease of those in the labor force was enough to lower the labor force participation rate 0.2% to 62.7%....at the same time, the decrease in number employed along with the increase in the population was great enough to cut the employment to population ratio, which we could think of as an employment rate, by 0.2% to 60.0%...in addition, the decrease in the number counted as unemployed was also large enough to lower the unemployment rate from 4.4% to 4.3%....meanwhile, the number who reported they were involuntarily working part time fell by 53,000 to 5,219,000 in May, which was also enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 8.6% in April to 8.4% in May, the lowest since November 2007....

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.. 

April Personal Incomes Up 0.4%, Personal Spending Up 0.4%, PCE Price Index Up 0.2%

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

thus, when the opening line of the press release for the April report tell us "Personal income increased $58.4 billion (0.4 percent) in April", they mean that the annualized figure for seasonally adjusted personal income in April, $16,437.5 billion, was $58.4 billion, or a bit less than 0.4% greater than the annualized personal income figure of $16,379.1 billion extrapolated for March; the actual, unadjusted change in personal income from March to April is not given...at the same time, annualized disposable personal income, which is income after taxes, rose by almost 0.4%, from an annual rate of an annual rate of $14,375.9 billion in March to an annual rate of $14,432.5 billion in April....the contributors to the increase in personal income can be viewed in the Full Release & Tables (PDF) for this release, also as annualized amounts, and were led by a $55.3 billion increase in wages and salaries to $8,315.6 billion, while interest and dividend income, usually a major component, fell by $2.4 billion to $2,299.4 billion..

for the April personal consumption expenditures (PCE) that will be included in 2nd quarter GDP, BEA reports that they increased at a $53.2 billion rate, or about 0.4%, as the annual rate of PCE rose from $13,008.9 billion in March to $13,108.4 in April....March PCE was revised from $13,099.5 billion annually to $13,008.9 billion, while February PCE was revised from $13,093.7 billion annually to $12,832.2 billion, which increased the February to March change to 0.3% from the previously reported unchanged, revisions that were already included in last week’s GDP report....the current dollar increase in April spending resulted from a $28.2 billion annualized increase to an annualized $4,238.1 billion in spending for goods and a $25.0 billion increase to an annualized $8,952.9 billion in spending for services, so the contribution from April retail sales is evident....total personal outlays for April, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $56.4 billion to $13,673.4 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $759.1 billion annual rate in April , virtually unchanged from the revised $759.0 billion in annualized personal savings in March... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, remained at 5.3% in April, after the previously reported March savings rate of 5.9% was revised to that level...

as you know, before those personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....that's done with the price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, which is included in Table 9 in the pdf for this report...that index rose from 112.028 in March to 112.240 in April, a month over month inflation rate that's statistically 0.189%, which BEA reports as an increase of 0.2 percent, following the PCE price index decrease of 0.2% reported for March...applying that inflation adjustment to the nominal changes in PCE left real PCE up 0.2% in April, after the March real PCE increase was revised to up 0.5%...note that when those price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in our familiar chained 2009 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....that result is shown in table 7 of the PDF, where we see that April's chained dollar consumption total works out to 11,752.7 billion annually, 0.2157% more than March's 11,727.4 billion, a difference that the BEA reports as 0.2%...

however, to estimate the impact of the change in PCE on the change in GDP, the month over month change doesn't help us much, since GDP is reported quarterly...thus we have to compare April's real PCE to the the real PCE of the 3 months of the first quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 1st quarter was represented by 11,688.5 billion in chained 2009 dollars..(note that's the same as is shown in table 3 of the pdf for the 1st quarter GDP report)....when we compare April's adjusted PCE of 11,467.7 to the 1st quarter real PCE of 11,688.5 on an annual basis, we find that April real PCE has grown at a 2.22% annual rate compared to the 1st quarter....this means that even if April real PCE does not improve during May and June, growth in PCE would still add 1.63 percentage points to the growth rate of the 2nd quarter...

April Trade Deficit Increases 5.2% on a Jump in Cellphone Imports

our trade deficit increased by 5.2% in April, after our March deficit was revised 3.6% higher...the Census report on our international trade in goods and services for April indicated that our seasonally adjusted goods and services trade deficit rose by $2.33 billion to $47.62 billion in April, from a March deficit that was revised from the originally reported $43.71 billion to $45.28 billion, which would result in a downward revision of 0.16 percentage points to 1st quarter GDP when the third estimate is released at the end of June ...in rounded numbers, the value of our April exports fell by ~$0.5 billion to $191.0 billion on a $0.5 billion decrease to $126.9 billion in our exports of goods and an increase of $0.1 billion to $64.0 billion in our exports of services, while our imports rose $1.9 billion to $238.6 billion on a $1.8 billion increase to $195.3 billion in our imports of goods and a less than $0.1 billion increase to $43.3 billion in our imports of services...export prices averaged 0.2% higher in April, so real growth in exports was less than the nominal dollar value by that percentage, while import prices were 0.5% higher, meaning real imports would be reduced from the nominal dollar values reported here by that percentage...

the nominal decrease in our April exports of goods came about as a result of lower exports of consumer and automotive goods, partially offset by increases in our exports of feeds and fuels...referencing the Full Release and Tables for April (pdf), in Exhibit 7 we find that our exports of consumer goods fell by $720 million to $15,855 million on a $392 million decrease in our exports of artwork and antiques and a $211 decrease in our exports of pharmaceuticals, and that our exports of automotive vehicles, parts, and engines fell by $532 million to $12,559 million on $258 million lower exports of passenger cars and $221 million lower exports of trucks, buses, and special purpose vehicles...in addition, our exports of other goods not categorized by end use fell by $160 million to $5,230 million...partially offsetting those decreases, our exports of foods, feeds and beverages rose by $582 million to $11,887 million on a $795 million increase in our exports of soybeans, our exports of industrial supplies and materials rose by $429 million to $37,533 million on a $380 million increase in our exports of fuel oil, a $202 million deincrease in our exports of crude oil, and a $511 million increase in our exports of other petroleum products, and our exports of capital goods rose by $19 million to $43,569 million solely on the strength of a $926 million increase in our exports of engines for civilian aircraft..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of consumer goods was the major reason for the April increase in our imports...our imports of consumer goods rose by $1,944 million to $50,947 million on a $1,758 million increase in our imports of cellphones; in addition, our imports of capital goods rose by $933 million to $51,530 million on a $313 million increase in our imports of computer accessories and a $252 million increase in our imports of computers, our imports of foods, feeds, and beverages rose by $370 million to $11,451 million, and our imports of other goods not categorized by end use rose by $731 million to $7,802 million....partially offsetting those increases, our imports of industrial supplies and materials fell by $1,472 million to $42,142 million, as our imports of crude oil fell by $1,946 million, our imports of fuel oil fell by $540 million, and our imports of non-monetary gold fell by $376 million, and our imports of automotive vehicles, parts and engines fell by $673 million to $29,898 million on a $396 million decrease in our imports of vehicle parts and accessories other than engines, bodies or tires.....

to gauge the impact of April trade on 2nd quarter growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here.....from that table, we can compute that 1st quarter real exports of goods averaged 124,616 million monthly in 2009 dollars, while inflation adjusted April exports were at 123,856 million in the same 2009 dollar quantity index representation... annualizing the change between the two figures, we find that April's real exports were at a 2.4% annual rate below those of the 1st quarter, or at a pace that would subtract about 0.18 percentage points from 2nd quarter GDP if continued through May and June.....from that same table, we can figure that our 1st quarter real imports averaged 186,836 million monthly in chained 2009 dollars, while inflation adjusted April imports were at 187,405 million in that same 2009 dollar representation...that would indicate that so far in the 2nd quarter, our real imports have increased at a 1.2% annual rate from those of the 1st 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 1.2% rate would thus subtract another 0.14 percentage points from 2nd quarter GDP....hence, if the April trade deficit is maintained at the same level throughout the 2nd quarter, our deteriorating balance of trade in goods would subtract about 0.32 percentage points from the growth of 2nd quarter GDP....note that we have not computed the impact of the less volatile change in services here because the Census does not provide handy inflation adjusted data on those, and we don't have easy access to the details on their price changes....

Construction Spending Fell 1.4% in April after March was Revised 1.4% Higher

the Census Bureau's report on construction spending for April (pdf) estimated that the month's seasonally adjusted construction spending was at a $1,218.5 billion annual rate, 1.4 percent (±1.0 percent) below the revised March annualized rate of $1,235.5 billion, but 6.7 percent (±1.5 percent) above the estimated annualized level of construction spending in April of last year...the annualized March construction spending estimate was revised 1.4% higher, from $1,218.3 billion to $1,235.5 billion, while the annual rate of construction spending for February was revised less than 0.1% higher, from $1,220.7 billion to $1,221.68 billion...those revisions together would suggest an upward revision of 0.16 percentage points to 1st quarter GDP when the third estimate is released at the end of June...

quoting further details from the release: "Spending on private construction was at a seasonally adjusted annual rate of $943.3 billion, 0.7 percent (± 0.8 percent)* below the revised March estimate of $949.7 billion. Residential construction was at a seasonally adjusted annual rate of $516.7 billion in April, 0.7 percent (±1.3 percent)* below the revised March estimate of $520.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $426.6 billion in April, 0.6 percent (± 0.8 percent)* below the revised March estimate of $429.3 billion. Public Construction: In April, the estimated seasonally adjusted annual rate of public construction spending was $275.3 billion, 3.7 percent (±2.0 percent) below the revised March estimate of $285.9 billion. Educational construction was at a seasonally adjusted annual rate of $70.7 billion, 2.0 percent (±2.6 percent)* below the revised March estimate of $72.2 billion. Highway construction was at a seasonally adjusted annual rate of $89.5 billion, 3.7 percent (±5.8 percent)* below the revised March estimate of $93.0 billion."

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of April spending reported in this release on 2nd quarter GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP must be adjusted for changes in price, and the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for each of the various components of non-residential investment....in lieu of trying to adjust for all of those indices, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment...

that index showed that aggregate construction costs were up 0.4% in April, up 0.2% in March and down 0.1% in February and up 0.3% in January....on that basis, we can estimate that April construction costs were roughly 0.6% greater than those of February and 0.5% greater than those of January, and obviously 0.4% greater than those of March...we then use those percentages to inflate spending for each of those months, which is arithmetically the same as deflating April construction spending, for comparison purposes...construction spending in millions of dollars for the first quarter is given as 1,235,541 for March, 1,221,681 for February, and 1,198,779 for January ...thus to find the difference between April's inflation adjusted construction spending and the construction spending of the first quarter, our formula becomes: 1,218,509 / ((1,235,541*1.004 +  1,221,681 *1.006 + 1,198,779 * 1.008) /3) =  0.99393, meaning real construction spending in April was down roughly 0.6% vis a vis the 1st quarter, or down at a 2.41% annual rate...to figure the potential effect of that change on 2nd quarter GDP,  we take the annualized difference between the first quarter average and April and take that result as a fraction of the annualized 1st quarter GDP figure, and thus can estimate that April construction spending is falling at a rate that would subtract 0.18 percentage points from the  growth of 2nd 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…)