Sunday, September 25, 2016

August new home construction and existing home sales

there were just two reports of note this week: the August report on New Residential Construction from the Census Bureau and the Existing Home Sales Report for August from the National Association of Realtors (NAR)...other reports released this week included Regional and State Employment and Unemployment for August from the BLS, and the Chicago Fed National Activity Index (CFNAI) for August, a weighted composite index of 85 different economic metrics, which fell to −0.55 in August, down from +0.24 in July, revised from the +0.24 reported last month....however, the 3 month average of the index still rose from –0.09 in July to –0.07 in August, which nonetheless indicates that national economic activity has been below the historical trend over those 3 recent months...in addition, this week also saw the Kansas City Fed manufacturing survey for September, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to +6 in September, up from -4 in August and --6 in July, suggesting that the 18 month regional contraction, mostly in energy related industries, may be coming to an end...

New Housing Construction Little Changed in August; Building Permits Down YoY

the August report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started during the month was at a seasonally adjusted annual rate of 1,142,000, which was 5.8 percent (±9.7%)* below the revised July estimated annual rate of 1,212,000 housing unit starts, but was 0.9 percent (±12.5%)* above last August's pace of 1,132,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, August's housing starts could have been up by 3.9% or down by as much as 15.5% from those of July, with even larger revisions possible after a number of months...in this report, the annual rate for July housing starts was revised from the 1,211,000 reported last month to 1,212,000, while June starts, which were first reported at a 1,189,000 annual rate, were revised up from last month's initial revised figure of 1,186,000 annually to 1,195,000 annually with this report....

those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 100,700 housing units were started in August, down from the 114,200 units started in July...of those housing units started in August, an estimated 66,700 were single family homes and 32,700 were units in structures with more than 5 units, down from the revised 72,700 single family starts in July, and down from the 40,400 units started in structures with more than 5 units in July...

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in August, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,139,000 housing units, which was 0.4 percent (±1.6%)* below the revised July rate of 1,144,000 permits, and was 2.3 percent (±1.5%) below the rate of building permit issuance in August a year earlier...the annual rate for housing permits issued in July was revised from 1,152,000 down to 1,144,000  annually....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 107,000 housing units were issued in August, up from the revised estimate of 95,100 new permits issued in July...the August permits included 71,300 permits for single family homes, up from 61,000 in July, and 32,500 permits for housing units in apartment buildings with 5 or more units, down from 31,600 such multifamily permits a month earlier...

for more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.142 Million Annual Rate in August and Comments on July Housing Starts...

August Existing Home Sales Little Changed from July or from August a Year Ago

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales slipped by 0.9% from July to August, projecting that 5.33 million homes would sell over an entire year if the August home sales pace were extrapolated over that year, a pace that was still 0.8% above the annual sales rate projected in August of a year ago; July sales at a 5.58 million annual rate were revised from the 5.59 annual rate indicated by last month's report...the NAR also reported that the median sales price for all existing-home types was $240,200 in August, down from $243,300 in July but 5.1% higher than in August a year earlier, which they report as "the 54th consecutive monthly year over year increase in home prices".....the NAR press release, which is titled "Existing-Home Sales Soften Further in August", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 541,000 homes sold in August, up by 5.5% from the 513,000 homes that sold in July, and up by 6.7% from the 504,000 homes that sold in August of last year, so we can see that it was just a seasonal adjustment that caused the annualized published figures up to show a decrease...that same pdf indicates that the median home selling price for all housing types fell 1.3%, from a revised $243,300 in July to $240,200 in August, while the average home sales price was $282,100, down 1.0% from the $284,900 average in July, but up 4.0% from the $271,300 average home sales price of August a year ago, with the regional average home sales prices ranging from a low of $222,700 in the Midwest to a high of $373,100 in the West...

for both seasonally adjusted and unadjusted graphs and additional commentary on this report, check out the following two posts from Bill McBride at Calculated Risk: Existing Home Sales decreased in August to 5.33 million SAAR and A Few Comments on August Existing Home Sales...

 

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

Sunday, September 18, 2016

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

reports released this past week included Retail Sales for August and Business Sales and Inventories for July from the Census bureau, August Industrial Production and Capacity Utilization from the Fed, and the August Consumer Price Index, the August Import-Export Price Index, and the August Producer Price Index, all from the Bureau of Labor Statistics... the Fed also released the 2nd 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 $88.0 trillion in the 1st quarter of this year to a record $89.1 trillion in the 2nd quarter, as the value of real estate owned by households rose by $474 billion and the value of corporate stock owned by households increased by $452 billion….. 

this week also saw the release of the first two regional Fed manufacturing surveys for September: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from -4.21 in August to -1.99 in September, suggesting that First District manufacturing was still contracting, but at a slower pace, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from +2.0 in August to +12.8 in September, suggesting more robust growth than the region's manufacturing has seen in any month over the past year...

Retail Sales Fall by 0.3% in August

seasonally adjusted retail sales were down in August while retail sales for July now indicates an increase, despite being unchanged, due to the downward revision of June sales...the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $456.3 billion during  the month, which was down 0.3 percent (±0.5%)* from July's revised sales of $457.9 billion but 1.9 percent (±0.7%) above the adjusted sales in August of last year...July's seasonally adjusted sales were statistically unrevised at $457.7 billion, while June sales were revised lower, from $457.9 billion to $457.4 billion, with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 1.8%, from $461,851 million in July to $470,250 million in August, while they were up 3.0% from the $456,340 million of sales in August a year ago...the revision to June sales means that 2nd quarter sales were roughly $0.5 billion lower than previously reported, which would be enough to dock 0.4 percentage points from 2nd quarter GDP when the 3rd estimate is published at the end of the month…

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the August Census Marts pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from July to August in the first sub-column, and then the year over year percentage change for those businesses since last August in the 2nd column; the second pair of columns gives us the revision of last month’s July advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the June to July change under "Jun 2016 (r)evised" and the revised July 2015 to July 2016 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance July sale estimates, before this month's revision, is here....

August 2016 retail sales table

from the above table, we can see that the 0.3% decrease in August sales was largely driven by the 0.9% decrease to $92,862 million in seasonally adjusted sales at motor vehicle and parts dealers; without which retail sales would have only shown a 0.1% decrease for the month...in addition, there was an 0.8% decrease to $33,115 million in sales at gas stations, which we figure to be mostly due to lower prices...if we take out gas station sales in addition to motor vehicles and parts, we find August retail sales would be still be down nearly half of 0.1%, which would be considered statistically unchanged from the previous month...also notice the other large month over month decreases: miscellaneous store retailers saw sales drop by 2.4% to $10,293 million, while sales at building material & garden equipment & supplies dealers fell 1.4% to $28,695 million...considering that, as we'll see next, prices except for food were generally higher, this report suggests a reduction in the contribution of personal consumption expenditures for goods to 3rd quarter GDP...

August Consumer Price Index Up 0.2% on Higher Medical Care, Rents

the consumer price index increased by 0.2% in August, as price increases for most core services were only partially offset by lower prices for groceries and energy commodities...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.2% in August after it had been unchanged in July and rose 0.2% in June, 0.2% in May, 0.4% in April and 0.1% in March....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 240.647 in July to 240.853 in August, which left it statistically 1.064% higher than the 238.316 index reading of last August, which is reported as a 1.1% increase....regionally, prices for urban consumers have risen 1.6% in the West, 1.1% in the Northeast, 1.0% in the South, and 0.6% in the Midwest over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people...with flat to lower prices for food and energy commodities offsetting higher prices for services, seasonally adjusted core prices, which exclude food and energy, rose by 0.3% for the month, with the unadjusted core index rising from 247.768 to 248.284, which put it 2.32% ahead of its year ago reading of 242.651...

the volatile seasonally adjusted energy price index was unchanged in August after falling by 1.6% in July, but rising by 1.3% in June, 1.2% in May and 3.4% in April....however, since the energy price index fell by more than 11.5% over this past winter, it still remained 9.2% below its level in August of a year ago....prices for energy commodities were 0.9% lower while the index for energy services rose by 0.8%, after rising by 0.9% in July....the decrease in the energy commodity index included a 0.9% reduction in the price of gasoline, the largest component, and a 2.5% decrease in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, fell by an average of 2.7%…within energy services, the index for utility gas service rose by 2.1% after increasing by 3.1% in July, and hence utility gas is now priced 1.1% higher than it was a year ago, while the electricity price index rose by 0.5%, after also increasing by 0.5% in July...energy commodities are now priced 17.3% below their year ago levels, with gasoline prices averaging 17.8% lower than they were a year ago...meanwhile, the energy services price index is still 0.4% lower than last August, as electricity prices have fallen 0.7% over that period..

the seasonally adjusted food price index was unchanged in August, just as it was in July, as 0.2% lower prices for food purchased for use at home offset 0.2% higher prices for food bought to eat away from home, where average prices at fast food outlets rose 0.2% and prices at full service restaurants rose 0.3%..the food price index is also unchanged from a year ago, as a 1.9% decrease in the price of food at home offset a 2.8% increase in prices for food away from home, which included a 12.0% jump in prices of lunches at elementary and secondary schools...

in the food at home categories, the price index for cereals and bakery products was unchanged in August as 1.5% lower prices for breakfast cereals and a 0.9% decrease in white bread prices offset a 1.7% increase in prices of crackers and a 1.2% increase in prices for bread other than white bread...the price index for the meats, poultry, fish, and eggs group fell by 0.4% as egg prices averaged 6.6% lower and a 0.5 increase in the beef index was offset by a 0.5% decrease in pork prices...meanwhile, the index for dairy products was unchanged as a 1.2% increase in prices for fresh whole milk was offset by a 0.6% decrease in prices for cheese while other dairy products were also lower... in addition, the fruits and vegetables index was also unchanged, as a 1.5% increase in tomato prices was offset by a 3.0% drop in prices for oranges and a 0.7% decrease in the index for processed fruits and vegetables...the beverages index was 0.1% lower as a 1.0% decrease in the price of roast coffee more than offset 0.6% higher prices for noncarbonated juices and drinks...lastly, prices in the other foods at home category were on average 0.2% lower, as a 4.0% drop in prices of olives, pickles, relishes and 1.5% lower salad dressing offset 1.2% higher prices for peanut butter and 1.0% higher prices for sugar.....among food at home line items, only eggs, which are now priced 37.9% lower than a year ago, and apples, which are 10.3% higher, have seen a price change greater than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.3% in August after rising by 0.1% in July and by 0.2% in April, in May and in June, the composite of all goods less food and energy goods rose by 0.1%, while the 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 August retail sales for inflation in national accounts data, the index for household furnishings and supplies was 0.2% lower on a 1.8% decrease in prices for living room, kitchen, and dining room furniture, while the apparel price index was 0.2% higher as 3.9% higher prices for girl's apparel and a 4.5% increase in prices for men's outwear was only partially offset by a 6.6% drop in prices for women's outwear...prices for transportation commodities other than fuel were down 0.2%, as prices for used cars and trucks were down another 0.6% after falling 1.0% in July, 1.1% in June and 1.3% in May...at the same time, prices for medical care commodities were 1.1% higher on a 1.3% increase in prescription drug prices...meanwhile, the recreational commodities index rose 0.1% as another 2.1% drop in TV prices was more than offset by a 1.5% increase in photographic equipment, a 5.3% increase in recreational book prices, and 1.0% higher prices for toys, games, hobbies and playground equipment...meanwhile, the education and communication commodities index was unchanged as a 1.3% price drop for computer software and accessories offset a 1.6% increase in prices for college textbooks....lastly a separate price index for alcoholic beverages was unchanged, while the price index for ‘other goods’ was up 0.4% on a 0.9% increase in prices for infants equipment and an 0.8% increase in cigarette prices..

within core services, the price index for shelter rose 0.3% on a 0.4% increase in rents, a 0.3% increase in owner's equivalent rent, and a 2.3% increase in costs for lodging away from home at hotels and motels, while costs for water, sewers and trash collection rose 0.2% and other household operation costs were 0.1% lower....at the same time, the index for medical care services rose 0.9% as hospital services rose 1.7% and health insurance was up 1.1%....meanwhile, the transportation services index was up 0.1% despite a 3.4% decrease in car and truck rentals as intercity transportation services rose 1.5% and motor vehicle insurance rose 0.5%...on the other hand, the recreation services index fell 0.1% as video & audio rental services fell 0.8% and admissions to sporting events fell 0.4%...meanwhile, the index for education and communication services rose 0.1% as land-line telephone services rose 0.6% while college tuitions fell 0.4%...lastly, the index for other personal services was up 0.1% with no increase greater than the 0.2% increase in haircut prices...among core prices, only televisions, which are now 20.6% cheaper than a year ago, saw prices change by more than 10% over the past year...

Industrial Production and Capacity Utilization Both Down 0.4% in August

the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.4% in August after rising by a revised 0.6% in July...as a result, industrial production is now down 1.1% from a year ago, as it had previously seen three consecutive quarter over quarter decreases...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 104.4 in August from 104.9 in July, which was unchanged from what was reported for July a month ago...at the same time, the June reading for the index was revised up from 104.1 to 104.3..

the manufacturing index, which accounts for more than 77% of the total IP index, fell by 0.4, from 103.4 in July to 103.0 in August, after July's manufacturing index was revised down from 103.6.... meanwhile, the mining index, which includes oil and gas well drilling, rose from 104.5 in July to 105.6 in August, after the July index was revised up from 104.2....nonetheless, the mining index still remains 9.3% lower than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 1.4% in August after rising 2.1% in July and a revised 2.9% in June...we would look for that August utility index to ultimately be revised higher, since population adjusted temperatures in August were slightly more above normal than the population adjusted temperatures of July...

this report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell from 75.9% in July to 75.5% in August...capacity utilization of NAICS durable goods production facilities rose fell from 76.3 in July to 75.8 in August, after July's figure was revised down from 76.5%, while capacity utilization for non-durables producers fell from a downwardly revised 74.8% to 74.6%...capacity utilization for the mining sector rose to 76.2% in August, up from 75.2% in July, which was originally reported as 74.9%, while utilities were operating at 80.4% of capacity during August, down from their 81.7% of capacity during July, which was revised up from 81.0%...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 Flat in August on Lower Food and Energy Prices, Higher Core Services

the seasonally adjusted Producer Price Index (PPI) for final demand netted no change in August as prices for finished wholesale goods fell by 0.4%, while margins of final services providers rose by 0.1%...this followed a July report that showed the overall PPI had decreased 0.4%, with prices for finished goods down 0.4% while final demand for services fell 0.3%....producer prices are now unchanged from a year ago, since most of the price decreases relating to lower oil and commodity prices went by the boards in early 2015...

as we noted, the index for final demand for goods, aka 'finished goods', fell by 0.4% in August, after falling 0.4% in July but rising by 0.8% in June, 0.7% in May and 0.2% in April, as the index for wholesale energy prices fell 0.8% from July to August and the price index for wholesale foods was 1.6% lower, while the index for final demand for core wholesale goods (ex food and energy) rose 0.1%...major wholesale price changes included a 32.2% drop in wholesale prices for eggs and an 11.5% drop in prices for fresh and dried vegetables, while lower wholesale prices for heat oil (down 7.6%), diesel fuel (-6.1%) and LP gas (-5.8%) dragged the energy index lower...

meanwhile, the index for final demand for services rose by 0.1% in August after falling by 0.3% in July and rising 0.4% in June, as the index for final demand for trade services fell 0.6%, the index for final demand for transportation and warehousing services fell 0.4%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.5% higher....noteworthy among trade services was a 6.0% increase in seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers, a 4.2% increase in margins for a apparel wholesaling, a 2.9% drop in margins for machinery and equipment wholesaling and a 5.2% drop in margins for chemicals and related products wholesaling...among transportation and warehousing services, margins for air transport of freight fell 1.8% and margins for airline passenger services fell 1.7%...in the core final demand services index, margins for securities brokerage, dealing, investment advice, and related services, margins for passenger car rental services, and margins for residential property sales and leases, brokerage fees and commissions were all 2.8% higher..

this report also showed the price index for processed goods for intermediate demand decreased by 0.1%, after rising 0.2% in July, 0.9% in June, 0.8% in May but also after falling monthly from last July through March, as prices for intermediate processed goods still remain 3.7% lower than in August a year ago.... the price index for intermediate energy goods fell by 1.1%, prices for intermediate processed foods and feeds fell 1.9%, while the price index for processed goods for intermediate demand less food and energy was 0.3% higher...meanwhile, the price index for intermediate unprocessed goods was down by 2.8%, after falling by 0.4% in July but rising by 2.8% in June, 1.3% in May, 3.0% in April and 1.6% in March, in the only increases in that index since June of last year...driving the August decrease was a 6.8% drop in the index for crude energy goods, as prices for crude oil fell 9.1%; at the same time, the index for unprocessed foodstuffs and feedstuffs fell 1.8%, while the index for core raw materials other than food and energy materials was 0.8% higher.... this raw materials index is now 8.4% lower than it was a year ago, but more than two thirds of the year over year decrease of 26.4% seen in November 2015 has since been retraced...

lastly, the price index for services for intermediate demand was unchanged in August, after rising 0.3% higher in July and 0.8% in June, as the index for trade services for intermediate demand fell 1.3%, while the index for transportation and warehousing services for intermediate demand was 0.1% higher, and the core price index for services less trade, transportation, and warehousing for intermediate demand was up 0.4%...driving the increase in prices for services for intermediate demand was a 2.8% increase in the index for intermediate services related to portfolio management; in addition, the indexes for loan services (partial); broadcast and network television advertising time sales; courier, messenger, and  U.S. postal services; and machinery and equipment parts and supplies wholesaling also rose...over the 12 months ended in August, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 1.4% higher than it was a year ago...    

July Business Sales Down 0.2%, Business Inventories Unchanged

after the release of the August retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for July (pdf), which incorporates the revised July retail data from that August report and the earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,303.6 billion in July, down 0.2 percent (±0.1%) from June revised sales, and down 0.8 percent (±0.4%) from July sales of a year earlier...note that total June sales were also revised down from the originally reported  $1,307.8 billion to $1,306.2 million....manufacturer's sales were down 0.2% to $458,864 million in July, and retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, rose 0.1% to $402,872 million, while wholesale sales fell 0.4% to $441,865 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,813.2 billion at the end of July, virtually unchanged (±0.1%)* from June, but 0.5 percent (±0.6%)* higher than in July a year earlier...the value of end of June inventories was revised up slightly from the $1,813.7 billion reported last month to $$1,813.8 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $620,329 million, 0.1% higher than in June, inventories of retailers were valued at $601,564 million, 0.3% less than in June, while inventories of wholesalers were estimated to be valued at $591,261 million at the end of July, statistically unchanged from June...

for GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index, which was down 0.4% in the aggregate in July...two weeks ago, we looked at real factory inventories with that adjustment, and judged they would provide a substantial boost to 3rd quarter GDP; similarly, last week we found that real wholesale inventories would also provide a boost to GDP...this week's real retail inventories for July, after a 0.4% price adjustment of the 0.3% nominal value decline, would have increased by about 0.1% over June, in a second quarter that saw producer price index increases of 0.5%, 0.7%, and 0.8% in April, May and June reduce real inventories...thus it appears that retail inventories are also on track to add incrementally to the growth of 3rd 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…)              

Monday, September 12, 2016

July's job openings, wholesale sales, and Mortgage Monitor

it was a fairly light week for economic releases; the only regular monthly reports released this week were the Job Openings and Labor Turnover Survey (JOLTS) for July from the Bureau of Labor Statistics, the July report on Wholesale Trade, Sales and Inventories from the Census Burfeau, and the Consumer Credit Report for July from the Fed, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $17.7 billion, or at a 5.8% annual rate, as non-revolving credit expanded at a 6.7% rate to $2,691.8 billion and revolving credit outstanding rose at a 3.4% rate to $969.0 billion...in a once a year report, the BLS also released the Current Employment Statistics Preliminary Benchmark Revision, which estimated that 150,000 fewer payroll jobs were created in the year ending March 2016 than had been reported in the monthly Employment Situation reports we review monthly...however, this preliminary estimate does not yet affect jobs totals as they're being reported; that will not happen until the final benchmark revision is published with the January 2017 employment report in February 2017....

other reports released this week included the August Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 51.4%, from 55.5% in July, indicating a much smaller plurality of service industry purchasing managers reported expansion in various facets of their business in August than in July...in addition, the Mortgage Monitor for July (pdf) was also released by Black Knight Financial Services, which we'll also review later today...

Job Openings were at a Record High in July,  with Hiring Up and Firings Down

the Job Openings and Labor Turnover Survey (JOLTS) report for July from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 228,000, from 5,643,000 in June to a record high of 5,871,000 in July, after June job openings were revised higher, from 5,624,000 to 5,643,000...July jobs openings were also 1.4% higher than the 5,788,000 job openings reported in July a year ago, as the job opening ratio expressed as a percentage of the employed rose from 3.8% in June to 3.9% in July, which was nonetheless unchanged from 3.9% a year ago...job openings increased in several sectors, with the 166,000 job opening increase to 1,270,000 openings in the broad professional and business services sector the largest increase for the month (see table 1 for more details)...like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in July, seasonally adjusted new hires totaled 5,227,000, up by 55,000 from the revised 5,172,000 who were hired or rehired in June, as the hiring rate as a percentage of all employed remained at 3.6%, the same as in July a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 27,000, from 4,964,000 in June to 4,937,000 in July, while the separations rate as a percentage of the employed was unchanged at 3.4%, which was also the separations rate of July a year ago (see table 3)...subtracting the 4,937,000 total separations from the total hires of 5,227,000 would imply an increase of 290,000 jobs in July, a bit more than the revised payroll job increase of 275,000 for July reported by the August establishment survey last week, but still not an unusual difference and well within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 2,980,000 of us voluntarily quit our jobs in July, statistically unchanged from the revised 2,979,000 who quit their jobs in June, while the quits rate, widely watched as an indicator of worker confidence, was unchanged at 2.1% of total employment, while it was still up from 1.9% a year earlier (see details in table 4)....in addition to those who quit, another 1,579,000 were either laid off, fired or otherwise discharged in July, down by 43,000 from the revised 1,701,000 who were discharged in June, as the discharges rate remained unchanged at 1.1% of all those who were employed during the month, which was down from the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 378,000 in July, up from 363,000 in June, for an 'other separations rate’ of 0.3%, which was unchanged from both June and from July of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...

July Wholesale Sales Down 0.4%, Inventories Flat

the July report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $441.9 billion, down 0.4 percent (+/-0.4%) from the revised June level, and down 1.0% percent (+/-0.9%) from wholesale sales of July 2015... the June preliminary estimate was revised down to $443.9 billion from the $444.6 billion sales reported last month, which meant that the June change was revised from the preliminary estimate of a 1.9 percent (+/0.5) increase to one of 1.7 percent (+/0.6).... July wholesale sales of durable goods were up 0.2 percent (+/-0.5%) from last month and were up 0.7 percent (+/-1.4%) from a year earlier, with a 0.6% increase in wholesale sales of professional and commercial equipment and supplies and a 0.5% increase in wholesale sales of electrical and electronic equipment leading the increase for the month, offset by 0.3% lower wholesale sales of automotive equipment and machinery....wholesale sales of nondurable goods were down 1.0 percent (+/-0.5%) from June and were down 2.4 percent (+/-1.4%) from last July, with a 3.5% decrease in wholesale sales of petroleum and petroleum products accounting for about half of the July drop...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 June report estimated that wholesale inventories were valued at a seasonally adjusted $591.3 billion at month end, statistically unchanged (+/-0.4%) from the virtually unrevised June level of $590.9 billion but 0.5 percent (+/-1.8%)* higher than in July a year ago....inventories of durable goods were up 0.3 percent (+/-0.2%) from June but down 1.8 percent (+/-1.6%) from a year earlier, with wholesale inventories of professional and commercial equipment and supplies up 1.4% in the most significant July increase...at the same time, the value of wholesale inventories of nondurable goods were down 0.3 percent (+/-0.5%)* from June but were up 4.3 percent (+/-2.5%) from last July, as the value of inventories of raw farm products fell 2.0% while wholesale inventories of chemicals and related products rose 1.4%...

like factory inventories, July wholesale inventories will be deflated with the appropriate sub-indices of the July producer price index, which showed that aggregate prices for finished goods were down 0.4% in July, with producer prices for food down 1.1% and producer prices for energy down 1.0%, following producer price index increases of 0.5%, 0.7%, and 0.8% in April, May and June respectively...since July prices were down 0.4%, that means the real quantity of July wholesale inventories, unchanged in value from June, was actually about 0.4% greater than June, following a second quarter when aggregate business inventories decreased....hence, the real increase in July inventories appears to provide a significant boost to 3rd quarter GDP from the wholesale component of business inventories...

Mortgage Delinquencies Up Again in July, Mean Time in Foreclosure Slips to 1084 Days

the Mortgage Monitor for July (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 550,075 home mortgages, or 1.09% of all mortgages outstanding, remaining in the foreclosure process at the end of July, which was down from 558,345 or 1.10% of all active loans, that were in foreclosure at the end of June, and down from 1.52% of all mortgages that were in foreclosure in July of last year.....these are homeowners who at least had a foreclosure notice served, but whose homes had not yet been seized, and the July "foreclosure inventory" now represents the lowest percentage of homes that remained in the foreclosure process since the middle of 2007... new foreclosure starts, which have been volatile from month to month, fell to 61,253 in July from 69,250 in June and were down from 71,500 in July a year ago; the 58,728 new foreclosures in April was the lowest in over ten years, so new foreclosures are now on a par with the foreclosure start level we saw during 2005 and 2006, before the mortgage crisis began...

in addition to homes in foreclosure, BKFS data also showed that 2,286,421 mortgages, or 4.51% of all mortgage loans, were at least one monthly mortgage payment overdue but not in foreclosure at the end of July, up from the 4.31% of homeowners with a mortgage who were more than 30 days behind in June, and up from the mortgage crisis low of 4.08% of all mortgages in March, but down from the mortgage delinquency rate of 4.67% in July a year earlier...of those who were delinquent in July, 695,148 home owners, or 1.37% of those with a mortgage, were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month, which was up from 692,370 such "seriously delinquent" mortgages in June...combining the total number of delinquent mortgages with those in foreclosure, we find that a total of 2,836,496 mortgage loans, or 5.60% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of July, and that 1,245,223, or 2.46% of all homeowners, were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

once again, we're including below that part of the monthly table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 16 of the Mortgage Monitor pdf, largely because with this report they've expanded the period covered by this table back to 2000, now giving us the historical details of the period before the mortgage crisis...the columns in the table below show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month over the past 7 months and for each January shown going back to January 2000…in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been delinquent and stuck in foreclosure because of the lengthy foreclosure pipelines…thus we can see that the average length of delinquency for those who have been more than 90 days delinquent without foreclosure has now been reduced to 502 days, down from the April 2015 record of 536 days, while the average time of delinquency for those who’ve been in foreclosure without a resolution has slipped back to 1084 days from the record 1092 days set in May of this year...that still means that the average homeowner who is in foreclosure now has been there roughly three years, which, considering that this year's new foreclosure starts were all less than 7 months old, suggests that many foreclosures started early in the crisis are still not yet completed… 

July 2016 LPS loan counts and days delinquent table

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

Sunday, September 4, 2016

August jobs report; July’s income and outlays, trade deficit, construction spending, and factory inventories reports

in addition to the Employment Situation Summary for August from the Bureau of Labor Statistics, this week also saw the release of four July reports that give us the lion's share of that month's contribution to 3rd quarter GDP, and in some cases suggest revisions to 2nd quarter GDP: the July report on Personal Income and Spending from the Bureau of Economic Analysis, and the July report on our International Trade, the July report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for July, all from the Census Bureau...

other regular monthly reports issued this week included the August report on light vehicle sales from Wards Automotive, which estimated that vehicles sold at a 16.9 million annual rate in August, down from both the 17.8 million annual pace in July and down from the 17.7 million rate in August of 2015, and the Case-Shiller Home Price Index for June, which is an average of April, May and June relative home prices; and which reported that home prices nationally for those 3 months averaged 5.1% 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 for August, which indicated its general business activity index fell from -1.3 in July to -6.2 in August, the twentieth consecutive negative reading for that index, indicating an ongoing recession in the Texas oil patch economy, and the widely followed August Manufacturing Report On Business from the Institute for Supply Management (ISM), which reported that their manufacturing PMI (Purchasing Managers Index) fell to 49.4% in August, down from 52.6% in July, a below 50 reading which indicates "contraction in US manufacturing for the first time since February 2016"

Employers Add 151,000 Jobs in August; Household Survey Shows Little Change

the Employment Situation Summary for August reported fairly weak job creation and a drop in the average workweek, while the unemployment rate, the employment to population ratio and the labor force participation rate all remained unchanged…estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 151,000 jobs in August, after the payroll job increase for July was revised up for July from 255,000 to 275,000, while the payroll jobs increase for June was revised down from 292,000 to 271,000…that means that this report represents a total of just 150,000 more seasonally adjusted payroll jobs than were reported last month, not even enough to keep up with the increase in the population...the unadjusted data shows that there were actually 224,000 more payroll jobs in August, after July had seen a school year related decrease of 999,000, so payroll job changes in both months had notable seasonal adjustments to produce the reported headline numbers...

seasonally adjusted job increases in August were concentrated in the service sector, as all goods producing sectors saw small payroll job decreases, led by a 16,000 job drop in durable goods manufacturing, with 5,600 of those job losses in the automotive sector... the health care and social assistance sector saw 36,100 additional jobs with the addition of 16,600 jobs in individual and family services...the leisure and hospitality sector added 29,000 more jobs by virtue of the addition of 34,000 more jobs in bars and restaurants, while there were 4,400 fewer jobs in performing arts and spectator sports...the broad professional and business services sector added just 22,000 jobs, as there were 11,900 fewer jobs in temporary help employment services....in addition, government employment increased by 25,000 jobs, with 24,000 of those in local and state government, evenly split between education jobs and other state and local government work….other sectors indicating notable job increases included retail, with the addition of 15,100 jobs, the financial sector, with the addition of 15,000 positions, and transportation and warehousing, where 14,900 jobs were added in August..

the establishment survey also showed that average hourly pay for all employees rose by 3 cents an hour to $25.73 an hour in August, after it had increased by 8 cents an hour in July; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $21.64 an hour...employers also reported that the average workweek for all private payroll employees decreased by 0.1 hour to 34.3 hours in August, after the July increase of 0.1 hour was revised to unchanged, while hours for production and non-supervisory personnel also fell by a tenth of an hour to 33.6 hours...meanwhile, the manufacturing workweek fell by 0.2 hour to 40.6 hours, while average factory overtime was unchanged at 3.3 hours...

at the same time, the August household survey indicated that the seasonally adjusted number of those who reported being employed rose by an estimated 97,000 to 151,614,000, while the estimated number of unemployed rose by 79,000 to 7,849,000; and hence the labor force increased by a total of 176,000...since the working age population had grown by 234,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 58,000 to 94,391,000, which was nonetheless not enough to change the 62.8% labor force participation rate...in addition, the relatively small increase in number employed was also not enough to boost the employment to population ratio, which we could think of as an employment rate, as it remained mired at 59.7%...meanwhile, with the small increases in both the employed and the unemployed, the unemployment rate also remained unchanged at 4.9%...at the same time, there was also an increase of 113,000 in those who reported they were forced to accept just part time work, from 5,940,000 in July to 6,053,000 in August, which left the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", also unchanged at 9.7% of the labor force in August....

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

Personal Income up 0.4% in July, Personal Spending up 0.3%

the July 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% 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 change reported for each of those are not the current monthly change; rather, they're seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase for a year if July's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from June to July..

thus, when the opening line of the press release for this report tell us "Personal income increased $71.6 billion (0.4 percent) in July", they mean that the annualized figure for seasonally adjusted personal income in July, $16,023.4 billion, was $71.6 billion, or actually somewhat more than 0.4% greater than the annualized personal income figure of $15,951.7 billion extrapolated for June; the actual, unadjusted change in personal income from June to July is not given...at the same time, annualized disposable personal income, which is income after taxes, also rose by more than 0.4%, from an annual rate of $13,999.8 billion in June to an annual rate of $14,059.9 billion in July...the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in July, the largest contributors to the $71.6 billion annual rate of increase in personal income were a $43.3 billion increase in wages and salaries and a $12.0 billion increase in personal current transfer receipts…

for the personal consumption expenditures (PCE) that we're interested in today, BEA reports that they increased at a $42.0 billion rate, or a bit more than 0.3% from June, as the annual rate of PCE rose from $12,755.7 billion in June to $12,797.6 in July....June PCE was revised from $12,738.8 billion annually to $12,755.7 billion, while PCE for months going back to January were also revised as well, all of which was already included in the 2nd estimate of 2nd quarter GDP which we reviewed last week (this report, although released a business day later than the GDP release, is concurrent)....the current dollar increase in July spending resulted from a $9.5 billion annualized increase to an annualized $4,109.3 billion in spending for goods and a $32.5 billion increase to an annualized $8,688.3 billion in spending for services, as a decrease in consumption of non-durable goods offset an increase in spending for new motor vehicles....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $41.6 billion to $13,265.2 billion annually in July, which left total personal savings, which is disposable personal income less total outlays, at a $794.7 billion annual rate in July, up from the revised $776.2 billion in annualized personal savings in June... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 5.7% in July from the June savings rate of 5.5%...

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...in a statistical oddity, that index was at 110.659 in July, exactly the same as it was in June, meaning our inflation adjustment for July is 0.000%, following the PCE price index change of +0.10037 in June, which the BEA rounded to +0.1% in 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 another....that result is shown in table 7 of the PDF, where we see that July's chained dollar consumption total works out to 11,565.2 billion annually, 0.3288% more than June's 11,527.3 billion, a difference that the BEA reports as +0.3%...

however, to estimate the impact of the change in July PCE on the change in GDP, the month over month change doesn't help us much, since GDP is reported quarterly...thus we have to compare July's real PCE to the the real PCE of the 3 months of the second quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the quarterly annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 2nd quarter was represented by 11,487.4 billion in chained 2009 dollars..(ie, that's the same as is shown in table 3 of the pdf for the 1st quarter GDP report)....when we compare July PCE of 11,565.2 to the 2nd quarter real PCE of 11,487.4, we find that July real PCE has grown at a 2.74% annual rate compared to the 2nd quarter....this means that even if July real PCE does not improve during August and September, growth in PCE would still add 1.89 percentage points to the growth rate of the 3rd quarter...

July Trade Deficit Down 11.6% on Higher Soybean Exports, Lower Drug, Cellphone and Aircraft Imports

our trade deficit fell by 11.6% in July as the value of our exports increased and the value of our imports decreased....the Census report on our international trade in goods and services for July indicated that our seasonally adjusted goods and services trade deficit fell by $5.2 billion to $39.5 billion in July from a revised June deficit of $44.7 billion...the value of our July exports rose by $3.4 billion to $186.3 billion on a $3.4 billion increase to $124.1 billion in our exports of goods and less than a $0.1 billion decrease to $62.3 billion in our exports of services, while our imports fell by $1.8 billion to $225.8 billion on a $1.9 billion decrease to $184.4 billion in our imports of goods while our imports of services rose $0.1 billion to $41.4 billion...export prices were on average 0.2% higher in July, so the relative amount of real July exports would be lower than the nominal amount by that percentage, while import prices were 0.1% higher, meaning real imports were smaller than the nominal dollar values reported here by that small percentage....

the increase in our July exports resulted from higher exports of foods, feeds and beverages, and more specifically exports of soybeans....referencing the Full Release and Tables for July (pdf), in Exhibit 7 we find that our exports of foods, feeds and beverages rose by $3,725 million to $14,680 million on a $3,556 million increase in our exports of soybeans...that exhibit also shows that our exports of industrial supplies and materials rose by $445 million to $32,878 million on a $209 million increase in our exports of precious metals other than gold, and a $205 million increase in our exports of fertilizers, and that our exports of automotive vehicles, parts, and engines rose by $365 million to $12,520 million on a $378 million increase in our exports of new and used passenger cars...offsetting those increases, our exports of consumer goods fell by $15 million to $15,980 million, as a $179 million decrease in our exports of artwork and antiques and a $129 million decrease in our exports of pharmaceuticals were partially offset by a $150 million increase in our exports of jewelry...in addition, our exports of capital goods fell by $226 million to $42,801 million on a decrease of $718 million in our exports of civilian aircraft which was partially offset by a $357 million increase in our exports of electric apparatuses, and a there was also $674 million drop to $4,852 million in our exports of other goods not categorized by end use....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that lower imports of consumer goods and capital goods were responsible for the $1.9 billion drop in our goods imports...our imports of consumer goods fell by $1,492 million to $48,307 million on a $963 million decrease in our imports of pharmaceuticals, a $642 million decrease in our imports of cellphones, and a $257 million decrease in our imports of gem diamonds, and our imports of capital goods fell by $722 million to $49,010 million on a $870 million decrease in our imports of civilian aircraft...in addition, our imports of automotive vehicles, parts and engines fell by $67 million to $28,364 million on a $184 million decrease in our imports of passenger cars, and our imports of goods not categorized by end use fell by $215 million to $7,300 million...partially offsetting those decreases, our imports of industrial supplies and materials rose by $388 million to $38,845 million on a $694 million increase in our imports of non-monetary gold, and our imports of foods, feeds, and beverages rose by $201 million to $10,660 million on a $92 million increase in our imports of fruits and juices, and smaller increases in several other food line items...

to gauge the impact of July trade on 3rd quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here....from that table, we can estimate that 2nd quarter real exports of goods averaged 118.135.3 million monthly in 2009 dollars, while inflation adjusted July exports were at 120,747 million in the same 2009 dollar quantity index representation... annualizing the change between the two figures, we find that July's real exports are running at a 9.1% annual rate above those of the 1st quarter, or at a pace that would add about 0.75 percentage points to 3rd quarter GDP if continued through August and September.....in a similar manner, we find that our 2nd quarter real imports averaged 179,054 million monthly in chained 2009 dollars, while inflation adjusted July imports were at 179,021 million...that would indicate that so far in the 3rd quarter, we have seen a negligible decrease at annual rate of less than 0.1% in our real imports from those of the 2nd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 0.1% rate might conversely add about 0.01 percentage points to 3rd quarter GDP....hence, if the July trade deficit is maintained throughout the 3rd quarter, our improving balance of trade in goods would add about 0.76 percentage points to the growth of 2nd quarter GDP....note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have easy access to all their price changes... 

Construction Spending Unchanged in July After May and June are Revised Higher

the July report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending for the month would work out to $1,153.2 billion annually if extrapolated over an entire year, which was statistically unchanged (±1.5%) from the revised annualized estimate of $1,153.5 billion in construction spending in June and 1.5 percent (±2.3%)* above the estimated annualized level of construction spending of July last year....June construction spending was originally reported at $1,133.5 billion annually, and it has now been revised up to $1,153.5 billion annually, while May construction spending was revised up from a $1,140.9 billion annual rate to a $1,143.75 billion rate...the combined upward revisions to May and June construction spending should add about 0.17 percentage points to second quarter GDP when the third estimate is released the last week of September...

private construction spending was at a seasonally adjusted annual rate of $875.0 billion in July, 1.0 percent (±1.5%)* above the upwardly revised June estimate of $866.5 billion, with residential spending of $445.5 billion up 0.3% (±1.3%)* from the downwardly revised annual rate of $444.0 billion in June, while private non-residential construction spending rose 1.7 percent (±1.5%) to $429.5 billion from the upwardly revised June level, as July's figures included a 4.6% increase in construction spending for office buildings and a 3.9% increase in spending for construction of manufacturing facilities....at the same time, public construction spending was estimated to be at an annual rate of $278.2 billion, 3.1 percent (±2.6%) below the revised June estimate of $287.0 billion, with public spending for power facilities down 27.1% to an annual rate of $7,632 million...

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of July spending reported in this release on 3rd quarter GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP must be adjusted for changes in price... in lieu of the multiple prices indexes for construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), we've opted to use the producer price index for final demand construction as an inexact shortcut... that index showed that aggregate construction costs were down 0.6% in July, after rising 0.1% in both May and June...on that basis, we can estimate that July construction costs were roughly 0.5% less than those of May and 0.4% less than those of April...we then use those percentages to deflate higher priced spending figures for each of those months, which is arithmetically the same as inflating July construction spending, for comparison purposes...annualized construction spending in millions of dollars for the second quarter is given as 1,153,520 for June, 1,143,750 for May, and 1,142,525 for April ...thus to compare July's inflation adjusted construction spending to that of the first quarter, our formula becomes: 1,153,175 / ( (1,153,520 *.994 + 1,143,750 *.995 + 1,142,525 *.996) / 3) = 1.01079, meaning real construction spending in July was up 1.079% vis a vis the 2nd quarter, or up at a 4.39% annual rate...to figure the effect of that change on GDP,  we annualize the difference between the second quarter average and July and take the result as a fraction of 2nd quarter GDP, and find that July construction spending is rising at a rate that would add between 0.07 and 0.08 percentage points to 3rd quarter GDP…

Factory Shipments Down 0.2% in July, Factory Inventories Up 0.1% in Big Boost to Q3 GDP

the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $8.4 billion or 1.9 percent to $454.8 billion in July, following a decrease of 1.8% in June, which was revised from the 1.5% decrease reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the advance report on durable goods we reported on last week...this report showed that new orders for manufactured durable goods rose by $9.6 billion or 4.4 percent to $228.6 billion, virtually unchanged from the previously published increase..

this report also indicated that the seasonally adjusted value of July factory shipments fell for the first time in five months, decreasing by $0.9 billion or 0.2 percent to $458.9 billion, following a 0.6% increase in June...shipments of durable goods were up by $0.3 billion or 0.1 percent to $232.7 billion, revised from the previously published $0.4 billion, 0.2% increase....meanwhile, the value of shipments (and hence of "new orders") of non-durable goods fell by $1.1 billion, or 0.5%, to $226.1 billion, as a price related $1.5 billion, 4.8% drop in the value of shipments from petroleum refineries accounted for the decrease...

meanwhile, the aggregate value of June factory inventories rose for the first time in the past thirteen months, increasing by $0.9 billion or 0.1 percent to $620.3 billion, following a June decrease that was reported as virtually unchanged....July inventories of durable goods increased in value by $1.4 billion or 0.4 percent to $383.1 billion, revised from the 0.3% increase that was reported in the advance report last week....on the other hand, the value of non-durable goods' inventories decreased by $0.5 billion or 0.2% to $237.2 billion, following a series of three increases, on a 2.3% drop in the value of petroleum inventories...

for GDP purposes, factory inventories are deflated with the appropriate components of the producer price index, which showed that aggregate prices were down 0.4% in July, with producer prices for food down 1.1% and producer prices for energy down 1.0%, following producer price increases of 0.5%, 0.7%, and 0.8% in April, May and June respectively...higher prices over those months meant that their real inventories were even lower than the decreases reported here by those percentages, while lower prices in July means that real July inventories were that much higher...hence, the small nominal increase in July inventories now looms as a large boost to 3rd quarter GDP from the manufacturer's component of business inventories...

 

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

Sunday, August 28, 2016

2nd estimate 2nd quarter GDP; July’s durable goods, new and existing home sales

the key economic release of the past week was the 2nd estimate of 2nd quarter GDP from the Bureau of Economic Analysis, which was released on Friday...other widely watched releases we saw earlier in the week included the July advance report on durable goods and the July report on new home sales, both from the Census bureau, and the Existing Home Sales Report for July from the National Association of Realtors (NAR)...this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for July, a weighted composite index of 85 different economic metrics, which rose to a 12 month high of +0.27 in July, up from +0.05 in June...however, that still left the 3 month average of the index at –0.10, which supposedly indicates national economic activity has been below the historical trend over those recent months...in addition, this week saw the release of two more regional Fed manufacturing surveys for August: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index collapsed to -10 in July from +11 in July, suggesting a return to contraction for that region's manufacturing; and the Kansas City Fed manufacturing survey for July, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to -4 in August, up from -6 in July, suggesting that the regional contraction, mostly in energy related industries, continues for the 18th month...

2nd Quarter GDP Revised to Indicate Growth at a 1.1% Rate

the Second Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 1.1% rate in the quarter, revised down from the 1.2% growth rate reported in the advance estimate last month, as residential investment was revised lower, private inventory investment decreased more than was previously estimated, our trade deficit was revised higher, and government shrunk more than was first reported...in current dollars, our first quarter GDP grew at a 3.4% annual rate, increasing from what would work out to be a $18,281.6 billion a year rate in the 1st quarter to a $18,436.5 billion annual rate in the 2nd quarter of this year, with the headline 1.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.3%, aka the GDP deflator, was applied to the current dollar change...

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 which actually occurred over the 3 month period, and that the prefix "real" is used to indicate that the change has been adjusted for inflation using prices chained from 2009, from which all percentage changes in this report are calculated, as they thus represent the change in quantity of goods and services output...given the misunderstanding evoked by the text of the press release, all the data that we'll use in reporting the changes here comes directly from the pdf for the 2nd estimate of 2nd quarter GDP, which is linked to on the sidebar of the BEA press release...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2012; table 2, which shows the contribution of each of the components to the GDP figures for those months and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; table 4, which shows the change in the price indexes for each of the components; and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...the pdf for the 1st 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 4.2% growth rate reported last month to a 4.4% rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 6.46% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated inflation at a 2.0% annual rate in the 2nd quarter, which was revised from the 1.9% PCE inflation rate reported a month ago...real consumption of durable goods grew at a 9.9% annual rate, which was revised from the 8.4% growth rate in the advance report, and added 0.71 percentage points to GDP, as an increase in real consumption of recreational goods and vehicles at a 15.2% rate accounted for more than half the durables increase...real consumption of nondurable goods by individuals rose at a 5.7% annual rate, revised from the 6.0% increase rate reported in the 1st estimate, and added 0.81 percentage points to 2nd quarter economic growth, as higher consumption of food, clothing and other non-durables more than offset a small decrease in consumption of energy goods ….at the same time, consumption of services rose at a 3.1% annual rate, revised from the 3.0% growth rate reported last month, and added 1.42 percentage points to the final GDP tally, as real health care consumption rose at a 5.6% rate...

meanwhile, seasonally adjusted real gross private domestic investment contracted at a 9.7% annual rate in the 2nd quarter, with the aggregate statistically unrevised from the 9.7% shrinkage estimate reported last month, as real private fixed investment shrunk at a 2.5% rate, rather than at the 3.2% rate reported in the advance estimate, while the inventory contraction was somewhat larger than previously estimated...investment in non-residential structures was revised from shrinking at a rate of 7.9% to shrinking at a 8.4% rate, and real investment in equipment was revised to show contraction at a 3.7% rate, also worse than the 3.5% contraction rate previously reported...at the same time, the quarter's investment in intellectual property products was revised from growth at a 3.5% rate to growth at a 8.7% rate...on the other hand, real residential investment was shown to be shrinking at a 7.7% annual rate, rather than the 6.1% contraction rate previously reported…after those revisions, the decrease in investment in non-residential structures subtracted 0.23 percentage points from the 2nd quarter's growth rate, the decrease in investment in equipment subtracted 0.22 percentage points from growth, lower residential investment subtracted 0.30 percentage points from GDP, while growth in investment in intellectual property added 0.34 percentage points to 2nd quarter GDP...

in addition, investment in real private inventories fell by an inflation adjusted $12.4 billion in the 2nd quarter, revised from the originally reported $8.1 billion of inventory shrinkage...this came after inventories had grown at an inflation adjusted $40.7 billion rate in the 1st quarter, and hence the $53.1 billion decrease in real inventory growth subtracted 1.26 percentage points from the quarter's growth rate, in contrast to the 1.16 percentage point subtraction due to slower inventory growth that was shown in the advance estimate....since slower growth in inventories indicates that less of the goods produced during the quarter were left "sitting on the shelf”, their decrease by $53.1 billion meant that real final sales of GDP were relatively greater by that much, and hence real final sales of GDP increased at a 2.4% rate in the 2nd quarter, in contrast to the real final sales increase at a 1.2% rate in the 1st quarter, when the change in inventories was smaller…

the previously reported increase in real exports was revised smaller with this estimate, while the reported decrease in real imports was revised to show a increase, and as a result the change in our net trade was a smaller addition to GDP rather than was previously reported...our real exports grew at a 1.2% rate rather than the 1.4% 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 0.14 percentage points to the 2nd quarter's growth rate, a bit less than the 0.16 percentage point addition shown in the previous report......meanwhile, the previously reported 0.4% decrease in our real imports was revised to a 0.3% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their increase subtracted 0.04 percentage points from 2nd quarter GDP....thus, our still weakening trade balance only added a net 0.10 percentage points to 2nd quarter GDP, rather than the 0.23% percentage point addition that had been indicated by the advance estimate…

finally, there were also negative revisions to real government consumption and investment in this 2nd estimate, as the entire government sector shrunk at a 1.5% rate, revised from the shrinking at a 0.9% rate previously reported...real federal government consumption and investment was seen to have shrunk at a 0.3% rate from the 1st quarter in this estimate, which was revised from the 0.2% contraction rate in the 1st estimate...real federal outlays for defense were revised to show shrinkage at a 3.1% rate, rather than the 3.0% contraction rate previously reported, and subtracted 0.12% percentage points from 2nd quarter GDP, while all other federal consumption and investment grew at a 3.8% rate, rather than the 3.9% rate previously reported, and added 0.10% percentage points to 2nd quarter GDP,,,meanwhile, real state and local consumption and investment shrunk at a 2.2% rate in the quarter, which was revised from the 1.3% contraction rate reported in the 1st estimate, and subtracted 0.25% percentage points from 2nd quarter GDP....note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services...

July Durable Goods: New Orders Up 4.4%, Shipments Up 0.2%, Inventories Up 0.3%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for July (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $9.7 billion or 4.4 percent to $228.9 billion in July, following a revised drop of 4.2% in June new orders, which had been originally reported as a 4.0% decrease...year to date new orders are still 0.9% below those of 2015, vs the statistically unchanged year over year change we saw in this report last month...as is usually the case, the volatile monthly change in new orders for transportation equipment drove the July headline change, as those transportation equipment orders rose $7.5 billion or 10.5 percent to $78,861 million, on a 89.9% increase to $12,498 million in new orders for commercial aircraft....excluding new orders for transportation equipment, other new orders were still up 1.5% in July, as new orders for computers and electronic products were up 3.6% to $24,780 million, contributing to a 1.6% increase in new orders for nondefense capital goods excluding aircraft, which is a proxy for equipment investment...

the seasonally adjusted value of July's shipments of durable goods, which will be inputs into various components of 3rd quarter GDP after adjusting for changes in prices, rose by $0.4 billion or 0.2 percent to $232.9 billion, after June shipments were revised from a increase of 0.4% to an increase of 0.5% because May shipments were revised 0.1% lower....a 1.5% increase in shipments of computers and electronic products drove the July change, as those shipments rose $0.4 billion to $27.1 billion... meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the first time in seven months, increasing by $1.2 billion or 0.3 percent to $383.0 billion, after the drop in June inventories was revised from a 0.2% decrease to a 0.1% decrease...an increase in inventories of transportation equipment were a major factor in the inventory increase, as they rose $0.5 billion or 0.4 percent to $123.7 billion, on a 7.2% increase to $11,519 million in inventories of defense aircraft...excluding the increase in inventories of transportation equipment, all other durable goods inventories increased 0.3% to $259,300 million...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, fell for the 2nd consecutive month, slipping by $0.8 billion or 0.1 percent to $1,126.6 billion, following a June decrease of 0.9%, which was statistically unrevised...a $1.9 billion or 0.2 percent to $772.2 billion decrease in unfilled orders for transportation equipment was responsible for all of the decrease, as unfilled orders excluding transportation equipment rose 0.3% to $354,349 million....compared to a year earlier, the unfilled order book for durable goods is now 2.2% below the level of last July, with unfilled orders for transportation equipment 3.2% below their year ago level, largely on a 7.4% decrease in the backlog of orders for motor vehicles... 

July New Home Sales Highest in at Least 8 Years

the Census report on New Residential Sales for July (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 654,000 new homes a year, which was 12.4 percent (±12.7%)* above the revised June rate of 582,000 new single family home sales a year and 31.3 percent (±19.9%) above the estimated annual rate that new homes were selling at in July of last year....the asterisk indicates that based on their small sampling, Census could not be certain whether July new home sales rose or fell from those of June, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....thus, that uncertainty must be considered when noting media reports alleging that new homes sales were at the highest level since October 2007...however, even allowing for a maximum downward revision reflecting the ±12.7% margin of error in this report, July new homes sales would still be at their highest level since March 2008...with this report; sales new single family homes in June were revised from the annual rate of 592,000 reported last month to a 582,000 a year rate, and home sales in May, initially reported at an annual rate of 551,000 and revised to a 572,000 a year rate last month, were unrevised with this report, while April's annualized home sale rate, initially reported at 619,000 and revised from 586,000 to 572,000 last month, were further revised down to 570,000 with this release..

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of Census field reps, which showed that approximately 57,000 new single family homes sold in July, up from the 53,000 new homes that sold in both May and June....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in July was $294,600, down from the median sale price of $310,500 in June and down from the median of $296,000 in July a year ago, while the average July new home sales price was $355,800, up from $353,500 average sales price in June, and up from the average sales price of $341,900 in July a year ago....a seasonally adjusted estimate of 233,000 new single family houses remained for sale at the end of July, which represents a 4.2 month supply at the July sales rate, down from the reported 4.9 month supply in June....

Existing Home Sales Fall 3.2% in July, Down 1.6% YoY, as Prices Slip

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell 3.2% from June to July, projecting that 5.39 million homes would sell over an entire year if the July home sales pace were extrapolated over that year, a pace that was also 1.6% below the annual sales rate projected in July of a year ago; June sales at a 5.57 million annual rate were essentially unrevised from last month's report...the NAR also reported that the median sales price for all existing-home types was $244,100 in July, down from $247,600 in June 5.3% higher than in July a year earlier, which they report as "the 53rd consecutive monthly year over year increase in home prices".....the NAR press release, which is titled "Existing-Home Sales Lose Steam in July ", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 514,000 homes sold in July, down by 11.7% from the 582,000 homes that sold in June, and down by 6.7% from the 551,000 homes that sold in July of last year, so we can see there was a sizable seasonal adjustment just to bring the annualized published figures up to the level reported...that same pdf indicates that the median home selling price for all housing types fell 1.4%, from a revised $247,600 in June to $244,100 in July, while the average home sales price was $285,900, down 1.3% from the $289,800 average in June, but up 3.6% from the $275,900 average home sales price of July a year ago, with the regional average home sales prices ranging from a low of $226,200 in the Midwest to a high of $373,100 in the West...

 

(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…)