September’s retail sales, industrial production, producer prices, & new home sales, and August’s business inventories..

it’s been a pretty busy week, with major reports on September retail sales and industrial production, as well as the release of the September producer price index by the BLS, & the September new home sales and August business inventories reports from the Census …we also saw the first two regional manufacturing surveys for October from Fed district banks, as the New York Fed reported their Empire State Manufacturing general business conditions index fell twenty-one points to 6.2, indicating significantly slower growth reported vis a vis September in the district that includes New York and northern New Jersey, and the October Manufacturing Business Outlook Survey from the Philadelphia Fed, which saw a slight decrease, from 22.5 to 20.7, in their broadest diffusion index, but which nonetheless indicated a significant plurality of firms in Pennsylvania and southern New Jersey reported an increase in manufacturing activity in October…

Retail Sales Fall 0.3% in September; Could Boost 3rd Quarter GDP Anyway

the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $442.7 billion for the month, which was a decrease of 0.3 percent (±0.5%)* from the revised August sales of $444.1 billion, but still 4.3 percent (±0.9%) above sales in September of last year…August’s seasonally adjusted sales were originally reported at $444.4 billion, and despite the statically significant downward revision, the July to August percentage change in sales was unrevised from the previously reported 0.6% (±0.2%) increase because July’s sales were also revised down, from $441.8 billion to $441.5 billion…recall that the asterisk on September’s sales indicates that from their small sampling of retail outlets, Census cannot yet determine whether sales rose or fell for the month…estimated unadjusted sales in September, extrapolated from that small survey, indicated sales fell to $424,608 million in September from $455,566 million in August, while they were up from the $401,379 million in September a year ago, so we can see there was a modestly large upward seasonal adjustment to sales data for September…  

to break down the details and explain what they mean, we’ll again start by including a picture of the table of monthly and yearly percentage changes in sales by business type from the Census pdf…notice there are three pairs of columns in the table below; the first double column shows us the percentage change in sales for each kind of business from the August revised figure to this September “advance” report in the first sub-column, and then the year over year percentage sales change since last September in the 2nd column; the second double column set below gives us the revision of the August advance estimates (now called “preliminary”) as of this report, with the new July to August percentage change under “Jul 2014 r” (revised) and the August 2013 to August 2014 percentage change as revised in the 2nd column of the pair….then, the third pair of columns shows the percentage change of the last 3 months of this year’s sales (July, August and September) from the preceding three months (April thru June) and from the same three months of a year ago….with estimates for those 3 months of the 3rd quarter now in place, we’ll be able to speculate about the contribution of retail sales to 3rd quarter GDP… 

September 2014 retail sales

he 2.3% growth in retail sales that we saw in the 2nd quarter, we have to remember that before retail sales are included in the personal consumption expenditures (PCE) component of GDP, they must first be adjusted for inflation…the BEA uses equivalent components of the consumer price index to do that, and CPI inflation ran more than 1.1% over the second quarter, reducing 2nd quarter PCE by a similar percentage …so far in the 3rd quarter, the CPI was up 0.1% in July but down 0.2% in August…if the negative results from the producer price index are any indication, consumer inflation, which will be reported next week, should also be flat in September, possibly resulting in a negative deflator for PCE in the third quarter…if that is the case, the goods components of PCE may well contribute more to GDP in the third quarter than they did in the second…

looking at the details for September in the first two columns above we can see that the seasonally adjusted 0.8% decline in motor vehicle and parts sales to $89,689 million was one major reason for the larger than expected headline decrease in September; nonetheless, even excluding motor vehicles and parts, retail sales still fell 0.2% to $394,619 million….other businesses that saw significant sales declines in September included clothing stores, where sales fell 1.2% to $21,174 million, building material and garden supply outlets, where sales fell 1.1% to $27,268 million, nonstore or online retailers, where sales also fell 1.1% to $39,604 million, furniture stores, where sales fell 0.8% to $8,312 million, and gasoline stations, where sales also fell 0.8% to $44,680 million…meanwhile, sales at electronics and appliance stores rose 3.4% to $9,228 million, likely reflecting initial sales of the iphone6, while sales also rose 0.6% to $48,070 million at restaurants and bars, 0.3% to $25,261 million at drug stores, and 0.2% to $55,980 million at general department stores…

although the overall 0.6% increase in August retail sales went essentially unrevised, there were revisions in sales for some of the component business types worth noting…the table of component changes from last month’s advance release is here and the middle two columns in the table above shows the revised data…we’d first note that August sales at auto dealers, the largest component of retail sales, were revised from the originally reported 1.5% increase to an increase of 2.0%, although the entire automotive sales increase was a bit less at 1.9%…clothing store sales were also revised higher, from the originally reported 0.3% rise to an increase of 0.8%, and sales at general merchandise stores, which were originally reported as down 0.1%, have been revised to show a 0.3% increase…on the other hand, sales at building materials and garden supply stores, which were originally reported as up 1.4% in August, have now been revised to an increase of just 0.5%…similarly, sales at miscellaneous store retailers, which were first reported as 2.5% higher in August, have been revised down to a 1.5% increase…other notable downward revisions include furinture store sales, reported as a 0.7% increase in the advance report, are now revised to a 0.3% rise; specialty store sales, as sporting goods, book and music stores, were also revised down 0.4%, from an increase of 0.9% to an increase of 0.5%, while the decrease in gasoline station sales is now shown at 1.1%, rather than the 0.8% decrease shown in the advance report, and the increase in drug stores sales was marked down from 0.6% to 0.3%…

September Industrial Production Increases 1.0%

Industrial production and Capacity Utilization for September indicated that industrial production rose 1.0% from a August reading which was revised down to a decrease of 0.2% from the previously reported 0.1% decline from July…the industrial production index, which is benchmarked to 2007 production equal to 100.0, rose to a record high 105.1 from the previously issued reading of 104.1 for August, which was revised to 104.0, while the industrial production index for earlier months was unrevised…the manufacturing index, which accounts for roughly 70% of the industrial composite, rose 0.5% in September to 100.5, after the manufacturing index for August was revised down from 100.2 to 100.0, while the September manufacturing index is now 3.7% higher than the level of September 2013….. meanwhile the seasonally adjusted utility index, rebounding from the effects of a mild summer on normal electricity consumption, rose 3.9% to 101.2 in September as overall temperatures and A/C use were slightly above normal… in addition, the mining index, which includes oil & gas production, increased by 1.8% to 133.7 in September, after increasing by 0.3% in August, and is now 9.1% higher than a year ago…

in addition to the breakdown of industrial production into the three major industry groups, this release also reports indexes for industrial production by market group…among final products and nonindustrial supplies, which rose by 0.7% in September, seasonally adjusted production of consumer goods rose 0.5% after falling a revised 0.7% in August…production of durable goods fell by 0.3% as production of consumer electronics fell 1.3% and the heavily weighted automotive products sector fell 1.1%…meanwhile, production of non-durable goods rose 0.8% as output of consumer energy products rose 2.2% while output of non-energy non-durables rose 0.3%, as a 1.6% increase in clothing production and a 0.7% increase in the output of chemical products was offset by a 0.4% decrease in paper products production and unchanged food and tobacco output…for the third quarter, production of durable goods increased at a 11.0% annual rate, led by annualized growth rates of 19.1% in automotive production and 12.7% in appliances, furniture, carpeting, while 3rd quarter production of non-durable goods fell at a 3.9% annual rate on a decrease in output of consumer energy products at a 10.8% annual rate, while non energy non durable goods production fell at a 1.4% annualized rate, despite growth of chemical products output at a 7.3% annual rate..

seasonally adjusted production of business equipment rose 0.3% in September after falling by a revised 0.2% in August as production of transit equipment rose 0.8% and production of information processing equipment rose 0.5%, while production of industrial equipment was unchanged…for the third quarter, output of business equipment rose at a 4.9% annual rate, as production of transit equipment rose at a 9.0% rate, production of information processing equipment rose at a 5.8% rate and output of industrial production equipment rose at a 2.8% rate….meanwhile, production of defense and space equipment rose by 1.4% in September and grew at a 3.2% annual rate over the 3rd quarter…in addition, production of supplies for use in construction were up by 0.4% for the month and at a 10.2% rate for the quarter, while production of business supplies rose by 1.4% in September, turning their growth rate in the third quarter positive at a 1.8% annual rate…meanwhile, production of raw and intermediate materials that would input into other production processes rose by 1.4% in September and at an 4.6% rate for the quarter, boosted by a 7.0% growth rate in durable goods parts, while the quarterly output of non-durable intermediates grew at a 1.1 annual rate and the annualized output of energy materials grew at a 4.4% rate for the quarter…

in the associated report on capacity utilization, which is the percentage of our plant and equipment that was in use during the month, the Fed found that the utilization rate for total industry rose in September to 79.3%, from 78.7% in August…..77.3% of our total manufacturing capacity was in use during September, up from 77.1% in August and up 1.0% from the factory operating rate of 76.1% in September of last year…the operating rate for NAICS classified durable goods manufacturers was at 78.1%, up from 77.0% in August, with capacity utilization ranging from 84.7% for manufacturers of electrical equipment, appliances, and components to 64.7% for manufacturers of non-metallic mineral products, while the September operating rate for NAICS classified manufacturers of non-durables was at 78.6%, up from 78.3% in August, with the oil and coal products industry operating at 84.7% of capacity while textile mills were operating at a 72.5% rate…. meanwhile, capacity utilization by the ‘mining’ industry rose from a revised 89.2% to 90.1%, an increase half the size of the production increase, reflecting new capacity added by the oil and gas industry, while the operating rate for utilities rose from 76.3% to 79.2%….our FRED graph for this report below shows the percentage of capacity in use for all industries monthly since 2007 in pink, while it shows the the seasonally adjusted industrial production index values for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007, at which time they were all benchmarked to equal 100.0… 
September 2014 industrial production

Producer Prices Fall 0.1% in September on Lower Food, Energy & Demand for Services

the September Producer Price Index from the Bureau of Labor Statistics indicated that the seasonally adjusted producer price index for final demand fell for the first time in 13 months as the index was down 0.1% from August, after producer prices were up 0.1% in July and unchanged in August, reducing the year over year increase in the index to 1.6%…the index for final demand for services fell by 0.1% for the first time since December as none of its subcomponents rose; the index for final demand for transportation and warehousing services, a measure of margins received by wholesalers, was 0.2% lower, the index for final demand for trade services was unchanged, while prices for final demand for services less trade, transportation, and warehousing services fell 0.1%…meanwhile, the price index for final demand for goods, aka ‘finished goods’, fell 0.2% after falling 0.3% in August and hence is down 0.5% for the third quarter…the price index for final demand for foods was down 0.7% as wholesale pork prices fell 10.1% and wholesale oilseeds were 8.7% lower priced than in August…the price index for final demand for energy was also down 0.7% as a 2.6% drop in wholesale gasoline prices offset 2.9% prices increases for both LP gas and heating oil…with both food and energy prices down, the index for final demand for core goods was up 0.2%, as wholesale prices for cosmetics and other toiletries rose 1.4%…

this report also showed the price index for processed goods for intermediate demand rose 0.1%, as prices for intermediate processed foods and feeds rose 0.6% while prices for intermediate processed energy goods fell 0.5%, and  intermediate core producer prices were 0.2% higher….meanwhile, the price index for intermediate unprocessed goods rose 0.6% after falling 3.3% in August and 2.7% in July on a 2.2% jump in producer prices for for unprocessed foods and feeds while there was a 1.1% decline in the index for raw energy materials and prices for unprocessed nonfood materials less energy rose 0.5%……finally, the price index for services for intermediate demand was unchanged in September, as a 0.2% increase in the index for intermediate trade services and a 0.1% increase in prices for transportation and warehousing services for intermediate demand offset a 0.2% decrease in prices for intermediate services less trade, transportation, and warehousing….over the 12 months ended in September, the price index for services for intermediate demand rose 1.5%…


August New Home Construction Continues at a Million a Year Pace

according to the Census report on New Residential Construction for September (pdf) starts on new housing units were estimated to be at a seasonally adjusted annual rate of 1,018,000 in September, which was 6.3 percent (±9.3%)*  above the revised estimated pace of 1,017,000 homes hypothetically started annually in August, and 17.8 percent (±14.4%) above the annual rate of 863,000 housing starts estimated in September a year ago…the asterisk on the September range indicates that the Census, based on their survey of a small percentage of permit offices visited by Census field agents, does have sufficient data to determine whether housing starts rose or fell for the month, while the numbers in parenthesis is the 90% confidence range, ie housing units started in September were likely at a seasonally adjusted annual rate between 3.0% less and 15.6% greater than those in August…..the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 93,200 total units were started in September, up from 86,000 in August, with 56,900 of those single family dwellings, while construction was started on 34.500 apartment units in buildings with 5 or more units…

the monthly data on new building permits have a much narrower margin of error than new housing starts and hence are probably a better monthly indicator of new construction trends than the volatile and often revised starts data… in September, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,018,000, which was 1.5 percent (±1.1%) above the revised August annual rate of 1,003,000 and 2.5 percent (±1.2%) above the 993,000 annual rate estimated for new permit issuance in September of last year…those estimates were extrapolated from the unadjusted estimate of 89,700 new permits issued in September, which was up from the estimated 87,200 new permits issued in August…of those units permitted in September, 53,700 (±0.9%) were for single family homes, and 33,400 (±5.6%) represented permits for housing units in building with 5 or more units…our FRED graph on this report below, which can also be viewed as an interactive at the FRED site, shows the seasonally adjusted annual rate of housing units started in thousands monthly in blue, and the annual rate of housing units authorized by building permits monthly in red since 2000…note that the number in thousands shown monthly for both metrics is an estimate of how many units would be permitted or started over an entire year if that month’s pace were continued over 12 months…  

September 2014 new home construction


August Sales Up 0.4% While Business Inventories Rise 0.2%

the Census Bureau also released the Manufacturing and Trade Inventories and Sales report for August this week, which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers’ shipments fell by 0.4 percent (±0.1%) from July to $1,353.4 billion in August, which was still 4.5% (±0.6%) above the total monthly sales level of August of last year…manufacturers sales were estimated at $503,106 million, down from $508,108 million, retailer’s sales were estimated at $396,328 million, up from $394,005 million, while merchant wholesalers accounted for $453,938 million of the overall total, down from $457,008 million in July….

meanwhile, total manufacturer’s and trade inventories were estimated to have increased 0.2 percent (±0.1%) from July to a seasonally adjusted $1,752.3 billion in August, which was up 5.4 percent (±0.4%) from August a year earlier…seasonally adjusted inventories of manufacturers were estimated to be valued at $653,917 million, up from $653,068 million; inventories of retailers were estimated to be valued at $560,366 million, down from $561,824 million, and inventories of wholesalers were estimated to be valued at $538,005 million at the end of August, up from July’s $534,437……the month end total business inventories to total sales ratio, the metric which is watched to determine if inventories are becoming excessive, was at 1.29, unchanged from July but up a tad from the 1.28 ratio of August a year ago…so far, inventory growth in July and August has been off the pace of the second quarter and their slower growth rate will likely be a negative for third 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 that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

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October 18 graphics

retail sales table:

September 2014 retail sales

industrial production:

September 2014 industrial production

new housing:

September 2014 new home construction

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August’s job openings and turnover, consumer credit, wholesale sales and the August Mortgage Monitor

in contrast to last week, there were not many economic reports of note this week…Tuesday brought us the Fed’s G19 report on August consumer credit and the August JOLTS jobs report from the BLS; then on Thursday the Census released the details on Wholesale Trade: Sales and Inventories for August…but Black Knight Financial Services, formerly LPS data & analytics, did release their mortgage monitor for August, the mostly graphics report we’ve been following for years to keep tabs on the ongoing mortgage crisis…so after we take a look at the regular monthly government releases, we’ll pull a few new graphs from the Mortgage Monitor and explain what they mean…

August Job Openings at 13 Year High While Hiring Fell by Most in 4 Years

the Job Openings and Labor Turnover Survey for August (JOLTS) from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 230,000 to a 13 year high of 4,835,000 at the end of August, while the estimate for jobs open at the end of July was revised down by 68,000 from the originally reported 4,673,000 openings to 4,605,000; job openings in restaurants and hotels rose by 73,000 to 632,000; there were also 63,000 more openings in health care and social assistance and 40,000 additional openings in retail…..job openings as a percentage of the employed labor force rose to 3.4% from 3.2% in July, up from 2.8% in August a year earlier and up from a low of 2.7% in January…based on 9,591,000 officially unemployed in August, there would be two unemployed who were actually looking for work during August for every job opening; that, of course, does not count those who might have wanted a job but didn’t look for work during the month…

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 include retirements and death…. in August, seasonally adjusted new hires totaled 4,640,000, down 296,000 from the 4,934,000 hired or rehired in July, as the hiring rate as a percentage of all employed fell from 3.6% to 3.3%, and was even lower than the 3.4% hiring rate in August a year earlier…hiring fell in every private jobs category, with hiring in construction falling by 73,000 to 298,000, while only hiring by state and local governments increased by 12,000 to 264,000….total separations also fell, from 4,629,000 in July to 4,440,000 in August, as the separations rate as a percentage of the employed fell from 3.3% to 3.2%, the same rate as a year ago…subtracting the 4,440,000 total separations from the total hires of 4,640,000 would imply an increase of 200,000 jobs in August, 20,000 more than the revised payroll job increase of 180,000 for August reported by the BLS establishment survey last week, a difference not unexpected between these two surveys that both have wide confidence intervals…

further breaking down the seasonally adjusted job separations, we find 2,473,000 quit their jobs in August, 74,000 less than the revised 2,547,000 who quit their jobs in July, while the quits rate, an indicator of worker confidence which is being watched by the Fed, remained unchanged at 1.8% of total employment…..in addition to those who quit, another 1,580,000 were either laid off, fired or otherwise discharged in August, down 146,000 from 1,726,000 discharges in July, which reduced the discharges rate from 1.2% to 1.1% of all those who were employed during the month, the lowest discharge rate since the recession began….meanwhile, other separations, which includes retirement and death, were at 387,000 in August, up from 356,000 in July, for an ‘other separations’ rate of 0.3%, which was unchanged….our FRED graph for this report below shows job openings in blue in thousands monthly since January 2005, and monthly hires in orange and monthly separations in violet over the same span…you can clearly see the August jump in openings in blue while hiring in orange fell…also note that months when separations in purple were above hires in orange, we were losing jobs…the two major components of separations are also included below, the count of layoffs and firings is tracked in red, while the number of those quitting their jobs monthly is shown in green….  

August 2014 JOLTS

August Consumer Credit Shows Slowest Growth This Year

the Fed’s G.19 Release on Consumer Credit for August indicated that total seasonally adjusted consumer credit increased at a 5.0% annual rate, or at a pace that would increase credit outstanding by $13.5 annually to $3,247.0 billion, the slowest growth rate in overall credit since last November… the revolving credit portion of the aggregate, which would mostly be credit card debt, decreased by $0.2 billion, or at a 0.3% annual rate, to $880.3 billion, while non-revolving credit, which includes loans for cars and college tuition but not borrowing for real estate, rose at a $13.7 billion annual pace to $2,366.7 billion, an annual growth rate of 7.0%….July’s 13 year high credit increase was revised down to a seasonally adjusted $21.6 billion rate of increase, instead of the previously reported $26.01 billion, with July data now showing a $5.4 billion annualized increase in revolving credit and a $16.2 billion increase in non-revolving credit…the Zero Hedge bar graph below shows the seasonally adjusted monthly change in non-revolving credit outstanding in red and revolving credit monthly in blue since the beginning of 2011, with decreases in credit outstanding for any either type pointing down from the zero line…notice the black line sums the two to track the headline change in credit that this release reports on…

August 2014 consumer credit via ZH

Wholesale Sales Fall 0.7% in August, Inventories Rise by the Same Amount

>the Census report on Wholesale Trade, Sales and Inventories for August estimated that seasonally adjusted sales of wholesale merchants fell 0.7% (+/-0.4%) to $453.9 billion from the revised July estimate of $457.0 billion, but were still up 5.8 percent(+/-1.8%) from August a year earlier….the July preliminary sales estimate was revised down by $1.6 billion or 0.3%, and hence was only up 0.4% over June, rather than the 0.7% previously reported…..August wholesale sales of durable goods were 0.1 percent(+/-0.5%)* above the revised July estimate and were up 7.0 percent (+/-1.4%) from August a year ago, as wholesale metal sales rose 1.6% while wholesale sales of computers and similar equipment fell 1.7%…seasonally adjusted sales of nondurable goods were down 1.3 percent (+/-0.5%) from July but were up but were up 4.7 percent (+/-3.0%) from last August as wholesale sales of clothing rose 3.4% while wholesale sales of petroleum products fell 4.2%…meanwhile, seasonally adjusted wholesale inventories were valued at $538.0 billion at the end of August, 0.7 percent (+/-0.4%) higher than the revised July level and 7.9% (+/-0.7%) above last August’s level, while July’s preliminary estimate was revised upward by $0.7 billion or 0.1%…wholesale durable goods inventories were up 0.8% (+/-0.4%) from July and up 8.4 percent (+/-1.2%) from a year earlier, with wholesale inventories of computer equipment up 4.5% while inventories of miscellaneous durable goods fell 0.8%…wholesale inventories of nondurable goods were up 0.5% (+/-0.4%) in August while they were up 6.9% (+/-1.2%) from last August, as wholesale inventories of drugs and druggists’ sundries were up by 1.6% while wholesale inventories of chemicals were down 2.8%… finally, the closely watched inventory to sales ratio of merchant wholesalers was at 1.19, up from the 1.17 ratio of July and up from the inventory to sales ratio of 1.16 in August of last year…

Mortgage Delinquencies Rise in August for 3rd Month in a Row; Average Time In Foreclosure Rise to Record 1010 Days

according to the Mortgage Monitor for August (pdf) from Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division), there were 912,898 home mortgages, or 1.80% of all mortgages outstanding, remaining in the foreclosure process at the end of August, which was down from 935,460, or 1.85% of all active loans that were in foreclosure at the end of July, and down from 2.66% of all mortgages that were in foreclosure in July of last year…these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and July’s so-called “foreclosure inventory” was the lowest percentage of homes in foreclosure since early 2008… new foreclosure starts also fell in August after rising in each of the previous three months, as the 81,612 homes foreclosed on in August was 10.0% lower than the 90,690 foreclosures started in July and 24.2% lower than the 107,552 foreclosures started in August of last year…

in addition to homes in foreclosure, August data showed that 2,994,567 mortgage loans, or 5.90% of all mortgages, were at least one mortgage payment overdue but not in foreclosure, up 4.9% from 5.64% of homeowners with a mortgage who were more than 30 days behind in July, but down from the delinquency rate of 6.20% a year earlier…of those who were delinquent in August, 1,143,222 home owners were considered seriously delinquent, which means they were 90 or more days behind on mortgage payments, but not in foreclosure at the end of the month…thus, a total of 7.70% of homeowners with a mortgage were either late in paying or in foreclosure at the end of August, and 4.06% of them were in serious trouble, ie, either “seriously delinquent” or already in foreclosure at month end… 

the graph below, from page 13 of the Mortgage Monitor pdf, shows the percentage of mortgages that were in the foreclosure process monthly since 1995 in green, the percentage of active home loans that were delinquent but not in foreclosure over the same period in red, and the total of both, representing total percentage of mortgages that were in some kind of mortgage trouble each month, in blue over the same period…we can see that the percentage of homes in foreclosure in green has been falling fairly steadily over the last two years and at 1.80% in August is now well below the October 2011 peak of 4.29% of mortgages in the foreclosure process…but notice that’s still more than 4 times the pre-crisis foreclosure inventory of 0.44% from December 2005 that’s highlighted on the graph, so the percentage of homes in foreclosure is still a long way from normal …similarly, with delinquent mortgages shown in red at 5.90% of all mortgage outstanding in August, while up seasonally from the 5.52% delinquency rate in May, is down to nearly half of the 10.57% of all mortgages that were delinquent but not in foreclosure at the peak of the mortgage crisis in January of 2010, but still above the December 2005 mortgage delinquency percentage of 4.27% noted on the graph…note also the seasonality of mortgage delinquencies apparent in the track of the red graph below, wherein they usually begin to increase at the beginning of the school year and peak during the holidays, and then decline at the beginning of the year as homeowners catch up on all their bills after holiday shopping…with the recent release of the iphone6, we can expect another increase in mortgage delinquencies in September, as has been the case each time previously a new Apple product was launched..

August 2014 LPS delinquencies and foreclosures

one of the special focal points of this month’s mortgage monitor report was an analysis of what had since happened to those homeowners who were in foreclosure at the end of last year…from page 15 of the Mortgage Monitor‘s presentation, the following pie graph is a graphic representation of the August status of those who were in foreclosure at the end of December….as you can clearly see, nearly half of the pie is purple, representing the 49% who were in foreclosure at the end of 2013 who are still in foreclosure today…meanwhile, the teal wedge of the pie indicates that 23% who were in foreclosure in December had since had their homes seized, and those loans are now listed as ‘REO’, or real estate owned by the mortgage holder…in orange, we see that 4% of those in foreclosure in December have reached an agreement with their banker to sell their house to a third party, often as a “short sale”, for less than the amount owed…the light blue wedge represents the 2% who somehow came up with the funds to pay off their mortgage, & hence now own their homes free & clear…also no longer in foreclosure are the 8% who are current, shown in dark blue, and the 2% those who caught up on their payments and are now again 30 days behind, shown in red, and also the 12% in green, who are those who are more than 60 days delinquent, but no longer in foreclosure at the end of August…as we learned from the July report, 53% of foreclosure starts are in this group who paid up and got out of foreclosure, only to fall behind and be foreclosed on again…

August 2014 LPS resolution of 2013 foreclosures

the next graphic, a bar graph from page 16 of the pdf, shows the count and hence the percentage of each of those 2013 foreclosure situations shown above that have been modified over the ensuing 8 months…the count of those that have been modified, accounting for 25% of the total, is shown blue in each bar for each situation shown in the pie above, while the red section in each bar are those that have not been modified…for instance, of the roughly 100,000 who were in foreclosure in 2013 who are now current, which is shown in the first bar, about 25% received a mortgage modification that helped them get current; similarly, for the 610,000 mortgages that are still in foreclosure 8 months later, 25% of them also had their mortgages modified, but still not enough to lift the foreclosure…we can also see that in the bars on the far right, representing those who’ve sold their homes or who paid off their mortgage, very few had their mortgages modified…on the other hand, of those who are now 30 days delinquent, almost all had a mortgage modification…similarly, for those who who are 60 days delinquent, almost half had a mortgage modification, but nonetheless have already missed two payments..although not included this month,. the July mortgage monitor (pdf) had several  graphs further breaking down the various types of modifications delinquent mortgages have undergone, including the state level data on plate 11

August 2014 LPS 2013 foreclosures as modified

the next graphic, from page 20 of the August Mortgage Monitor, first shows us the total count of mortgages that have been 90 days or more delinquent but not in foreclosure for every six months over the duration of the mortgage crisis, and then it gives us a color coded representation of the length of time that those seriously delinquent mortgages had been delinquent in each of those June and December bar shaped snapshots…the first bar is June 2009, & then the highest bar is December 2009, one month before the peak of the crisis…within each bar, the percentage of seriously delinquent mortgages that were 3 to 6 months behind on payments is shown in blue, the portion of seriously delinquent mortgages that were 7 or 8 months late is shown in red, the percentage of seriously delinquent mortgages that were 9 to 11 months behind is shown in green, while those mortgages that are 12 or more months behind on payments are shown in purple…the last bar shows August details; note the blue 3 to 6 month delinquencies at 44% for August are at the highest proportion of the total since December 2010…

August 2014 LPS bucket profile of seriously delinquent

to tie all these graphics together, we’ll include a portion of the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 24 of the pdf….the columns here 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 shown going back to January 2008….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 stuck in that process because of the lengthy foreclosure pipelines…notice that although the average length of delinquency for those who have been more than 90 days delinquent without foreclosure has fallen to 493 days, the average time for those who’ve been in foreclosure without a resolution has lengthened to a record average 1010 days…

August 2014 LPS FC & delinquent loan count 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 that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

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Oct 11 graphics

August JOLTS:

August 2014 JOLTS

August consumer credit:

August 2014 consumer credit via ZH

August delinquencies and foreclosures:

August 2014 LPS delinquencies and foreclosures

status of 2013 foreclosure inventory:

August 2014 LPS resolution of 2013 foreclosures

2013 foreclosures as modified:

August 2014 LPS 2013 foreclosures as modified 

bucket status of 90 day delinquencies:

August 2014 LPS bucket profile of seriously delinquent

non-current states table:

August 2014 LPS non current state table

loan counts (complete):

August 2014 LPS FC & delinquent loan count table

as above, edited:

August 2014 LPS FC & delinquent loan count table

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September jobs report, August incomes and outlays, trade, factory orders, construction spending, July Case-Shiller, et al

it’s been a very busy news week, with several important economic releases…in addition to the employment reports for September released on Friday, we also saw the International Trade Report for August (pdf) released on the same day, and the Personal Income and Outlays report for August on Monday, which gives us nearly 69% of GDP for the month…there were also several diffusion indexes for September derived from surveys of industry management released this week, including:

Employers Add 248,000 Payroll Jobs in September

the establishment survey conducted for September by the Bureau of Labor Statistics indicated that nonfarm payroll employment increased by a seasonally adjusted 248,000 jobs to 139,435,000 jobs, somewhat more than was expected, while August’s payroll jobs count addition was revised up from 142,000 to 180,000, as was July’s, up from 212,000 to 243,000, resulting in a reported net addition of 317,000 seasonally adjusted jobs with this release, and the highest year to date job creation count in 15 years…the unadjusted establishment data indicates that there were actually 701,000 non-farm payroll jobs in September, as 1,053,300 jobs were regained in local government education before the seasonal adjustment, partially reversing the job losses recorded in July when school district employees were released for the summer…the FRED bar graph below incorporates the seasonal adjustments and the revisions to the July & August reports and shows the reported payroll job change monthly since the beginning of 2008, with job gains above the zero line and job losses below it…   

September 2014 payroll jobs

seasonally adjusted payroll jobs increased in all major sectors in September, led by an increase of 81,000 additional jobs in the broad professional and business services category, with 33,600 of those in employment services and another 11,500 in management and technical consulting services….an additional 28,000 slots were added in retail, with 19,500 added by food and beverage stores, as a grocery labor dispute in New England ended….employment also increased with the addition of 33,000 more jobs in leisure and hospitality, with 20,400 of those working in bars and restaurants… another 22,700 jobs were added in health care and social assistance, with the addition of 14,200 in ambulatory health care services and 6,200 jobs in hospitals…there were also 16,000 more jobs in construction, 8,800 of which were working for specialty trade contractors and 6,200 of which were working in residential construction…in addition, the information and financial sectors added 12,000 jobs each, with the addition of 5,400 in the motion picture and sound recording industries for the former and 6,300 more insurance employees for the latter…there were also 12,000 more government jobs in September, as an addition of 21,500 jobs in education at the state level was partially offset by the loss of 14,400 jobs other than education at the local level…job additions by other sectors included 9,000 in resource extraction, 4,000 in manufacturing, 1,900 in transportation and warehousing, and 1,800 in wholesale trade…

the average workweek for all payroll employees was rose to 34.6 hours after 5 months at 34.5 hours, with generally longer workweeks in the services and shorter workweeks in resource extraction and construction, and with the manufacturing workweek unchanged at 40.9 hours and factory overtime increasing by 0.1 hour to 3.5 hours….the average workweek for production and nonsupervisory employees, on the other hand, fell by 0.1 hour to 33.7 hours, as the average nonsupervisory service sector employee saw their workweek fall 0.1 hour to 32.4 hours…the average hourly pay for all workers fell by a penny an hour to $24.53 an hour, with their year over year increase at 47 cents, or less than 2%, while the average pay for nonsupervisory workers was unchanged at $20.67, while their year over average hourly pay rose 46 cents, a 2.3% average increase in hourly pay over the past year…

Labor Force Participation Rate at 36 Year Low with Those Not in Labor Force at Record High

in contrast to the decent establishment survey results, the household survey indicated new records – none of which were good….the employment data extrapolated from the September survey of 60,000 households showed that the seasonally adjusted count of the employed rose by 232,000 to 146,600,000, a number not directly comparable to the establishment data since it also includes farm workers and the self-employed… meanwhile, the count of the unemployed fell by 329,000 to 9,262,000, which thus means the number of us who were counted in the labor force fell by 97,000, leaving the unemployment rate, or those counted as unemployed as a percentage of the total, at 5.9%, down 6.1% in August…with an increase of 217,000 in the working age population and 97,000 less in the labor force, the count of those not in the labor force (and hence not counted when the percentages are calculated) rose by 315,000 to a record high 92,584,000…therefore, the large drop in the unemployed, and hence in the unemployment rate, can almost entirely be accounted for by those who dropped out of the labor force and thus weren’t counted….as a result, the labor force participation rate fell back from 62.8% to 62.7%, a 36 year low last matched in February 1978, before large numbers of women entered the labor force…and although the count of the employed rose by 232,000,  the increase was statistically small enough to leave the employed to population ratio unchanged at 59.0% for the 4th month in a row….our FRED graph below shows the employment to population ratio, which we could think of as the employment rate, in blue, and the labor force participation rate in red, back to the turn of the century…

September 2014 household survey metrics2

of the seasonally adjusted total of 146,600,000 of us counted as being employed in September, 119,287,000 reported they were working full time, 671,000 more than in August, while 27,359,000 reported they were working part time, or less than 34 hours in the reference week, a decrease of 384,000 part time workers over the August part time count…of those, the count of those working part time who would rather work full time fell by 174,000 to 7,103,000; as a result of that, combined with the total leaving the workforce altogether, the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, fell by 0.2% to 11.8%…meanwhile, the number of us unemployed for more than 27 weeks who were still looking for work fell by just 9,000 in September to 2,954,000, while the median duration of unemployment rose from 13.2 weeks to 13.3 weeks…among the 92,584,000 of us not officially in the labor force and hence not counted as unemployed, 6,007,000 reported that they still wanted a job, down from 6,382,000 in August, but up from 5,775,000 a year earlier; of those, 2,226,000 were categorized as “marginally attached to the labor force” because they had looked for work sometime during the last year, but not during the 30 day period covered by the September survey…698,000 of those were further characterized as “discouraged workers”, because they reported that they haven’t looked for work because they believe there are no jobs available to them… 

Personal Income Rises 0.3% in August; Spending Rises 0.5%, Prices Fall

other than the employment report, the report on Personal Income and Outlays for August from the Bureau of Economic Analysis was probably the most important this week, as this is the report that gives us the monthly data on our personal consumption expenditures (PCE), which is nearly 69% of GDP, as well as the important monthly personal income data, total personal savings and the national savings rate, in addition to the price index for PCE, the inflation gauge the Fed targets and which is used in this report to adjust both personal income and consumption expenditures for inflation to arrive at ‘real’ change figures….like the GDP reports, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the actual monthly dollar changes, which are not reported, are thus on the order of one twelfth of the reported amounts… however, the percentage changes are expressed as a month over month change and are used within the report as if they refer to the annualized amounts, so the two are frequently conflated in the media… 

total personal income increased in August at a seasonally adjusted and annualized $47.3 billion rate, to what would be a gross national personal income of $14,860.8 billion annually, which was 0.3% higher than in July, when personal income increased by 0.2% over June…disposable personal income (DPI), which is total income after taxes, increased at an annualized rate of $35.2 billion to $13,111.4 billion annualized, which was also a 0.3% increase over July, while July’s DPI was also up 0.2% over June…increases in private wages and salaries accounted for $30.4 billion of the August personal income gains, with service industry payrolls increasing by $24.6 billion, goods producing industry payrolls rising $6.0 billion, and government payrolls up by $1.4 billion….increases in supplements to wages and salaries, such as employer contributions to pension plans, accounted for another $4.7 billion of August’s annualized increase, while employee contributions for government social insurance, which is subtracted from the personal income figure, increased at a $4.3 billion rate…meanwhile, proprietors’ income decreased at a $8.5 billion rate in August, mostly due to a $9.7 billion decrease in farm owners incomes, as incomes of individual proprietors of other types of business were up $1.4 billion….other sources of the August personal  income changes included rental income of individuals, which increased at a $6.3 billion clip in August, personal interest and dividend income, which fell at a $0.2 billion rate, and personal transfer payments from government programs, which increased at a $17.2 billion rate.. 

meanwhile, seasonally adjusted personal consumption expenditures (PCE), rose at a $57.5 billion annual clip to $11,980.6 billion in August, which was 0.5% higher than July’s annualized figure, when the increase in PCE over June was not statistically significant….personal outlays for services increased at a $41.0 billion rate to an annualized $7,968.9 billion, personal spending for durable goods rose at a $23.3 billion rate to $1,331.0 billion annually, while personal consumption of non-durable goods fell at a $6.7 billion annual rate to an annualized $2,680.8 billion…..total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $60.4 billion in August to $12,406.1 billion, in contrast to the increase of just $3.5 billion in July outlays….the increase in outlays left personal savings, which is disposable personal income less total outlays, at $705.3 billion for the month, down from the savings of $730.5 billion in July…as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell from 5.6% in July to 5.4% in August…  

while personal consumption expenditures account for over 68% of our GDP, before their change is included in the quarterly computation of the change in real GDP they will be adjusted for inflation first, to give us the real change in consumption, and hence real goods and services produced for that consumption…that’s done with the price index for personal consumption expenditures, which is included in this report, which is a chained price index based on 2009 prices = 100….that index fell to 109.079 in August from 109.130 in July, meaning that month over month inflation actually fell by .05%, and hence the personal consumption figure for August will have to be adjusted up by that fraction; however, in the one significant digit rendering of this report, real (inflation adjusted) personal consumption is still listed as increasing by 0.5% for August, as in like manner the change in real disposable income, or the purchasing power of disposable income, also increased by 0.3% for August, same as before the adjustment…

our FRED graph below, which can also be viewed as an interactive, shows monthly real disposable personal income in blue and real personal consumption expenditures in red since January 2000, with the scale in chained 2009 dollars for both on the left; also shown on this same graph in green is the monthly personal savings rate over the same period, with the scale of savings as a percentage of disposable income on the right…the spike in income and savings at the end of 2012 was a result of bonuses and income manipulation before the year end fiscal cliff; the earlier spikes were as a result of the tax rebates enacted as a fiscal stimulus under George Bush….although it may appear from the graph that real disposable income has been accelerating over the past 13 years, real DPI as shown below is not adjusted for increases in the population; on a per capita basis, real DPI is up just 21.1% over the span of this graph…     

August 2014 income and outlays 

August Trade Deficit Slows Slightly to $40.1 Billion

the August report on our International Trade in Goods and Services from the Commerce Department indicated that our seasonally adjusted trade deficit in goods and services was at $40.1 billion for the month, down from the revised trade deficit of $40.3 billion in July, as our exports rose more than $0.4 billion to $198.5 billion on a $0.1 billion increase to $138.8 billion in our goods exports and a $0.4 billion increase to $59.6 billion in our services exports, while our imports rose $0.2 billion to $238.6 billion on a $0.1 billion increase to $198.7 billion in our imports of goods, while our imports of services rose $0.1 billion to $39.9 billion….the July trade deficit was revised down from the previously reported $40.5 billion, and combined with August’s deficit, that gives us an $80.4 billion trade deficit for the 2 months of the 3rd quarter, in contrast with the $130.3 billion trade deficit of the 2nd quarter, suggesting the change in trade will positively impact 3rd quarter GDP…since last August, our overall trade deficit has increased by $0.6 billion, on an $7.9 billion increase in exports and a $8.4 billion increase in imports…

end use categories of exports that saw seasonally adjusted increases in August included capital goods, exports of which were up $1,010 million to $47,134 million, on increases of $566 million in exports of telecommunications equipment, $260 million in exports of computer accessories, $167 million more exports of industrial engines and $133 million more exports of other industrial equipment, which were partially offset by a $133 million decline in exports of engines for civilian aircraft; consumer goods, exports of which were up $765 million to $17,274 million, on a $422 million increase in exports of jewelry and a $168 million increase in exports of pharmaceuticals; and Industrial supplies and materials, exports of which rose $746 million to $44,241 million on $335 million more exports of nonmonetary gold, $264 million more in fuel oil exports, $224 million more exports of finished metal shapes, $172 million more exports of steelmaking materials and $133 million more exports of other precious metals, which were partially offset by a $222 million decrease in exports of nonferrous metals other than copper and aluminum….in addition, our exports of goods not categorized by end use rose by $389 million to $5,656 million… meanwhile, our exports of automotive vehicles, parts, and engines fell by $1721 million in August to $13,591 million, and our exports of foods, feeds & beverages fell by $580 million to $10,482 million, on $291 million less exports of soybeans and $167 million less exports of corn…

the July to August increase in imports of goods included a $1759 million increase to $50,852 in our imports of capital goods, as we imported $1,134 million more of civilian aircraft, $255 million more in semiconductors and $201 million more computer accessories; we also imported $45,797 million worth of consumer goods, $704 million more than July, as we imported $340 million more in cotton apparel and cotton household goods and $236 million more in apparel and textiles other than wool or cotton….meanwhile, our imports of automotive vehicles, engines and parts fell by $1,362 million to $27,559 million, our imports of foods feeds and beverages fell by $280 million to $10,554 million on $125 million lower fruit and fruit juice imports, and our imports of industrial supplies and materials fell by $245 million to $55,522 million on $744 million lower imports of crude oil and $299 million lower imports of fuel oil which were partially offset by $327 million more in imports of organic chemicals and $262 million more imports of fertilizer…in addition, our imports of goods not categorized by end use fell by $475 million to $6,320 million..

included below is Bill McBride’s graph of our trade deficit from his coverage of this report, which shows the relationship of our net petroleum trade deficit to our deficit overall….reading from the top $0 line down, the black graph line tracks our deficit in petroleum trade as a negative in billions of dollars since 1998; over the same span, the red graph shows our trade deficit for everything else except oil, also as a negative from the $0 line; combined together, those two sum to our total trade deficit, which Bill has graphed in blue…it’s pretty clear that even though our oil deficit in black has generally been falling (ie, going up towards zero on this chart) over the past couple of years, our trade deficit in everything else in red has continued to grow, and hence there’s been little improvement in our monthly deficit… 
August 2014 McBride trade deficit

August Construction Spending Falls 0.8%; Unfilled Factory Orders at Record High While New Orders Fall 10.1%

the week also saw the Census report on Construction Spending for August (pdf). which estimated that our seasonally adjusted construction spending for the month would work out to an annual rate of $961.0 billion of spending overall, 0.8 percent (±1.8%)* below the revised July estimate of spending at a $968.8 billion annual rate and 5.0 percent (±2.3%) above last August’s adjusted and annualized level of construction spending….private construction spending was at a seasonally adjusted annual rate of $685.0 billion, 10.8 percent (±1.0%)* lower than the revised July estimate, with residential spending falling 0.1 percent (±1.3%)* and non-residential construction falling 1.4 percent (±1.0%), while public construction spending was estimated at $275.9 billion, 30.9 percent (±2.8%)* below the revised July estimate….in addition, Census also released the Full Report on Manufacturers’ Shipments, Inventories, & Orders for August(pdf), which showed new orders for manufactured goods fell by a record $56.1 billion or 10.1% to $502.0 billion, more than reversing the $53.0 increase in new orders in July, as new orders for commercial aircraft returned to normal…this report also showed factory shipments fell by $5.0 billion or 1.0% to $503.1 billion, factory inventories rose by $0.8 billion or 0.1% to $653.9 billion, and unfilled factory orders rose by $7.0 billion or 0.6% to $1,164,463 billion, which was the highest level value of unfilled orders on record….   
Annual Gains in Case-Shiller Home Price Indexes Lower in July

this week also saw the release of the Case-Shiller Home Price Indices for July which showed unseasonably smaller increases in home prices in all of their indices…for July, the 10-City and 20-City Composites, which compare repeat sale home prices of the three month period of May to July vis a vis the 3 month period from April to June, increased 0.6% while the National Index was up 0.5% over last month..on an unadjusted basis, all cities except San Francisco, where prices slipped 0.4%, saw home prices increase, although 17 saw smaller increases in July as compared to last month..the largest increases were seen by New York, where prices were up 1.1%, by Detroit, where prices rose 0.9%, and by Dallas and Miami, where prices rose 0.8%…on a year over year basis, the 10-City and 20-City Composites both rose 6.7%, in contrast to the year over year gains of 8.1% seen by both indexes last month, while the National Index was up 5.6% compared to the annual increase of 6.2% seen nationally last month….the largest year over year home price increases were seen in Las Vegas at 12.8%, Miami at 11.0% and San Francisco at 10.3%, while Cleveland, where prices just rose 0.9%,was the only city showing an annual home price increase of less than 3.0%…

included below are the pair of interactive FRED graphs we have created to show the historical track of home price indexes for each of the cities in the 20 city index, which are all based on 2000 home prices equal to 100.0… in our first FRED graph, we show the tracks of home price indexes for Atlanta in bright blue, Boston in bright red, Charlotte in dark green, Chicago in orange, Cleveland in purple, Dallas in grey, Detroit in mauve, Denver in mustard, Las Vegas in dull blue, and Los Angeles in beet red… for the larger interactive view of this graph at FRED, click here; there you can move your cursor across the graph and view the monthly price history of the changes in the price indices for all 10 cities shown below, just as we have included the home price index values for each of them for the June report in our screenshot… 

July 2014 Case Shiller A-L

our second FRED graph of the Case-Shiller city indices shows the the historical price track of the metro home price indexes for Miami in bright blue, Minneapolis in bright red, New York in dark green, Phoenix in orange, Portland in violet, San Diego in grey, San Francisco in mauve, Seattle in mustard, Tampa in dull blue and Washington DC in beet red; in addition, this second chart includes the track of the Case-Shiller Composite 20 shown as a heavier black line…the S&P Case-Shiller index is not seasonally adjusted, but you will notice that the seasonal home price swings have become more pronounced since the housing bust…again, you can click here for the larger 1000 pixel interactive version of this graph at the St Louis Fed web site, where all the lines can be easily traced and  the index values for each  viewed over time with their interactive tool… 

July 2014 Case Shiller M-Z

(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 that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

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October 4 graphs

September payroll jobs:

September 2014 payroll jobs

September household survey metrics:

September 2014 household survey metrics2 

August income and outlays:

August 2014 income and outlays

August trade via McBride:

August 2014 McBride trade deficit

July Case-Shiller A-L:

July 2014 Case Shiller A-L 

July Case-Shiller M-Z:

July 2014 Case Shiller M-Z

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2nd quarter GDP revision, August’s reports on durable goods, new and existing home sales

the key release of this past week was the 3rd estimate of 2nd quarter GDP from the BEA on Friday, which showed our economy expanded at a real 4.6% rate this past spring; the week also saw the two reports on home sales for August; the Census report on new home sales and the National Association of Realtor’s report on sales of existing homes…from the manufacturing sector, there was the August advance report on durable goods and two regional Fed surveys for September: the Richmond Fed, reporting for a District that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported slightly faster growth in September as the Fifth District manufacturing composite index rose to 14, up from a reading of 12 in August, in a diffusion index where positive numbers indicate expanding manufacturing activity… similarly, the Kansas City Fed, surveying an region that includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, also reported that Growth in Tenth District Manufacturing Activity Edged Higher (pdf) as their June composite index rose to 6 in September from 3 in August….this week also saw the release of the Chicago Fed National Activity Index for August (pdf), a weighted composite index of 85 different economic metrics grouped into four broad categories of data, which fell to –0.21 in August from +0.26 in July, with the negative number indicating growth below the historical trend…..45 of the 85 individual indicators made positive contributions as production related indicators subtracted .17 from the index, employment-related indicators added up to zero, sales, orders, and inventories added 0.08, while the the consumption and housing category subtracted 0.12 from the overall reading for August…

2nd Quarter GDP Revised to Show Growth at a 4.6% Rate

the Third Estimate of 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our economy grew at a 4.6% annual rate in the 2nd quarter, revised from the 4.2% annual growth rate reported last month, as fixed investment and net exports were revised higher…when taking the 2.1% contraction in the first quarter into account, real GDP has now grown at a 1.19% annual rate year to date….in current dollars, our 2nd quarter GDP would extrapolate to $17,328.2 billion annually, up 1.67%, or at a 6.9% annual rate from the $17,044.0 billion annualized figure of the 1st quarter…however, since the change in GDP being reported here is not a measure of the change in the dollar value of our GDP but a measure of the change in our output, the current dollar value of output is adjusted for inflation based on prices chained from 2009 , from which all percentage change calculations in this report are based….the resulting inflation adjustment used in the second quarter, aka the “GDP deflator”, implies annual inflation at a 2.1% rate, unchanged from the inflation factor reported for the second quarter last month, and up from the 1.3% deflator applied to GDP in the 1st quarter…while we cover the details below, recall that all quarter over quarter percentage changes reported in this release are given at an annual rate, which means that they’re expressed as a compounded change 4 times the change that actually occurred over the 3 month period… 

real personal consumption expenditures, the largest component of GDP, were little changed from the second estimate, as they grew at a 2.5% annual rate and contributed 1.75% to the quarter’s growth rate…real consumption of durable goods grew at a 14.1% rate, revised slightly from the 14.3% growth rate reported in the 2nd estimate, and added .99% to the final GDP figure; almost half of that was an increase in consumption of motor vehicles and parts, which grew at a 19.1% annual rate and added .45% to GDP; in addition, real outlays for durable household equipment and furniture grew at a 12.9% rate and added .20% to the quarter’s GDP, while real consumption of recreational goods and vehicles rose at a 13.3% rate and added .25%, as all durables consumption benefitted from a negative 1.9% deflator…meanwhile, real personal consumption of non-durable goods rose at a 2.2% rate, revised from the previous estimate of a 1.9% growth rate, as inflation adjusted food and beverage outlays fell at an inflation adjusted 1.3% annual rate and inflation adjusted energy goods consumption fell at a 3.3% annual rate…so while the increase in real consumption of clothing and all other core non-durable goods added .49% to GDP, the decreased consumption of food subtracted .07% and the decrease in energy goods consumption subtracted .08%…in addition, real consumption of services grew at an 0.9% rate and added 0.42% to the quarter’s growth, revised from the 0.8% growth rate and 0.40% addition reported in the 2nd estimate last month, as real outlays for housing and utilities contracted at a 3.4% rate and subtracted .40% from 2nd quarter growth on a return to more normal weather, while the health care sector grew at a 3.9% rate and added .45% to the final GDP figure…

meanwhile, seasonally adjusted real gross private domestic investment grew at a 19.1% annual rate in the 2nd quarter, up from the 17.5% that was estimated last month, as the growth rate of private fixed investment was revised to 9.5% from the 8.1% of the 2nd estimate and as such added 1.45% to the 2nd quarter’s growth rate…real non-residential fixed investment grew at a 9.7% rate, rather than the 8.4% rate last estimated, as investment in non-residential structures was revised from growth at a 9.4% rate to growth at a 12.6% rate, which now has added 0.35% to the quarter’s GDP growth…in addition, investment in equipment grew at a 11.2% rate, not the 10.7% rate reported last month, and added 0.63% to 2nd quarter growth, as investment in industrial equipment grew at a 27.3% rate and investment in information processing equipment grew at a 26.6% rate, and the quarter’s investment in intellectual property products was revised from a growth rate of 4.4% to a 5.5% growth rate and added 0.21% to the annualized change in growth for the quarter, as R&D spending rose at a 8.0% annual clip….meanwhile, residential investment was revised to show growth at a 8.8% rate, not the 7.2% rate reported last month, and as a result added 0.27% to overall economic growth in the 2nd quarter…  

in addition, the real (inflation adjusted) change in private inventories was also revised up, as they grew by an inflation adjusted $84.8 billion, revised from the $83.9 billion increase reported a month ago, leaving us with a $49.6 billion change in inventory growth from the first quarter’s inventory growth of $35.2 billion, which in turn added 1.42% to the 2nd quarter’s growth rate…since higher inventories are indicative of produced goods that have not been shipped or sold, their increase by $49.6 billion leaves real final sales of GDP less than the headline figure by that amount and thus they are recorded rising at a 3.2% rate in the 2nd quarter.. 

as we mentioned when reviewing the July international trade report 3 weeks ago, the revisions to June in that report resulted in a net positive revision to GDP as well…last month, the BEA estimated that our seasonally adjusted 2nd quarter exports had increased at an inflation adjusted 10.1% annual rate while imports rose at a 11.0% rate, for an increase in the trade deficit that subtracted 0.43% from the 2nd estimate of 2nd quarter GDP…with the revision including corrected June data, we now find that 2nd quarter exports have increased at 11.1% rate, while growth in imports were revised to 11.3% from the previous estimate…as you should recall, exports add to gross domestic product because they represent that part of our production that was not consumed or added to investment in our country, while imports subtract from GDP because they represent either consumption or investment that was not produced here…thus the revised increase in real exports added 1.43% to 2nd quarter growth, while the increase in real imports subtracted 1.77% from GDP, leaving us with a smaller negative .34% impact of trade on the 2nd quarter’s GDP…   

lastly, while real government consumption and investment at the Federal level was mostly unrevised, state and local governments grew more than previously estimated…real federal government consumption and investment shrunk at a 0.9% rate vis a vis the first quarter, which was unrevised, as real federal spending for defense grew at a 0.9% rate and added 0.04% to GDP, while.all other federal consumption and investment fell at a 3.8% rate, rather than the 3.7% rate published in the earlier two estimates, and which still subtracted 0.10% from GDP…real state and local outlays rose at a seasonally adjusted 3.4% rate, rather than the the 2.9% increase previously reported, as real state and local investment rose at a 14.6% rate and added 0.26% to GDP while state and local consumption expenditures rose at a 1.2% rate and added 0.11% to 2nd quarter growth…  

our new FRED bar graph below, which can also be viewed as an interactive, has been updated with these latest GDP revisions…each color coded bar shows the change, in billions of chained 2009 dollars in one of the major components of GDP over each quarter since the beginning of 2012…in each quarterly grouping of seven bars on this graph below, the quarterly changes in real personal consumption expenditures are shown in blue, the quarterly changes in real fixed private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in real private inventories is shown in yellow, the real change in exports are shown in purple, while the change in real imports is shown in green ..then the change in state and local government spending and  investment is shown in pink, while the change in Federal government spending and investment is shown in grey…those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they’ll appear below the zero line….  

2nd quarter 2014 GDP 3rd estimate

Durable Goods Order Backlog at Record $1,165.0 Billion in August, 13.1% Higher than Year Ago

although the headlines read that new orders for durable goods fell 18.2% in August, that widely watched monthly change in new orders was again rendered meaningless by the change in volatile orders for civilian aircraft, as new orders for Boeing jetliners fell to 107, from the record 324 logged in July, and hence August’s new orders merely reflect the absence of those orders that drove the July gain to a seasonally adjusted increase of 22.5% over June…the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for August (pdf) from the Census Bureau estimated that new orders for manufactured durable goods fell by a seasonally adjusted $54.5 billion to $245.4 billion, a record drop that effectively reversed the $55.1 billion or 22.5% increase in July….new orders for transportation equipment fell 42.0% to $76,804 million as new orders for non-defense aircraft fell 74.3% to $17,976, but strip out the orders for transport equipment and new orders rose 0.7% in August to $168,629 million, with a respectable 0.6% increase to $73,233 million in the important new orders for non-defense capital goods less aircraft, an indicator of business investment…meanwhile, seasonally adjusted shipments of durable goods, which will be reflected in 3rd quarter GDP, decreased by $3.7 billion or 1.5% in August to $246.1 billion, with shipments of automotive equipment, down $4.8 billion or 6.7% to $47,422 million, largely responsible, as shipments excluding transportation equipment rose 0.1% to $173,564 million….in addition, seasonally adjusted inventories of durable goods, another GDP contributor which have been up 16 out of the last 17 months, rose $1.7 billion or 0.4% to a new record at $403.0 billion, as once again inventories of motor vehicles and parts, up 0.7% to $26,877 million, influenced the overall increase…but more importantly, unfilled orders for manufactured durable goods, which we consider a better measure of industry conditions than the widely watched but volatile new orders, increased by $7.4 billion or 0.6% to a record  $1,165.0 billion …once again, the order backlog for automotive equipment, up 1.3% to $17,084 million, and for civilian aircraft with their long lead times, up 0.8% to $570,069, were a large part of this aggregate increase, but even without transportation equipment, unfilled orders still increased by 0.8% to $422,930 million, with unfilled orders for non-defense capital goods up a solid 1.0% to $731,756 million…overall, unfilled orders for durable goods are now 13.1% ahead of last year’s backlog…

Existing Home Sales Fall 1.8% in August as New Home Sales Rise ~18%

according to the National Association of Realtors (NAR), seasonally adjusted existing home sales fell by 1.8% in August to an annual rate of 5.05 million completed transactions, from an revised annual rate of 5.14 million sales in July, while home sales still remained 5.3% below the annual sales rate of 5.33 million units in August of last year….before the seasonal adjustment and conversion to an annualized figure, an estimated 479,000 homes sold in August, down 3.0% from the 494,000 homes that sold in July and down 7.5% from the estimated 518,000 homes that sold in August a year ago…both seasonally adjusted and unadjusted data (pdf) indicate that homes sales are down in every region of the country from a year ago, with sales in the West down the most, 12.9% lower than a year ago….the preliminary median home selling price for all housing types was $219,800 in August, down from $221,600 in July, but 4.8% higher than the $209,700 median sales price in August of last year, in home price data that is not seasonally adjusted…the average home sales price was $265,200, down from $267,500 in July, while up 3.4% from $256,600 in August a year ago, with regional average home prices ranging from a high of $341,900 in the West to the average of $211,800 for homes sold in the Midwest….foreclosed homes, which sold for an  average of 14% below the price of similar homes in their market, accounted for 6% of August sales, while short sales, at 2% of all sales, were discounted by an average of 10%…the median time on the market for all homes was 53 days in August, up from 48 days in July, and up from a median of 43 days on the market in August a year ago.…those who bought houses with cash accounted for 23% of transactions in August, down from 29% in July and the lowest overall share of all cash buyers since December 2009, while those identified as investors accounted for 12% of all transactions, down from 16% in July and down from the 17% sales to investors a year earlier….domestic 30 year mortgage rates averaged 4.12% in August, down from 4.13% in July; while the share of first time home buyers remained unchanged at 29%, still well below the historical average of 40%….2.31 million existing homes remained available for sale at the end of August, which would be a 5.5-month supply of unsold homes at the August sales pace, down 1.7% from July but up from the 2.21 million existing homes available for sale a year earlier…

while existing homes sales were somewhat lower in August, sales of new homes were around 18% higher than July sales, which themselves were revised up by nearly 4%… the Census bureau report on New Residential Sales for August estimated that new single family homes were sold at a seasonally adjusted annual rate of 504,000 in August, which was 18.0 percent (±16.3%) above the revised July rate of 427,000 annually and was 33.0 percent (±21.7%) above the annualized new homes sales pace in August of last year….the July annualized sales rate was revised up from the 412,000 annually reported a month ago to 427,000, while June’s sales rate was revised down from 422,000 annually to 419,000…note that the number in parenthesis is the 90% confidence range, which indicates that based on their small sampling, Census is only 90% confident that August home sales rose between 11.3% and 54.7% over those of a year ago, and that this report may be subject to revisions even greater than that range….although August’s annualized new home sales were widely reported as at the highest rate since May 2008, we should point out that 504,000 was the same annual rate first published for May of this year, which was subsequently revised down to 442,000 annually the next month…the unadjusted data from Census field reps estimated that 41,000 homes sold in August, up from 39,000 in July, while July’s unadjusted sales were revised from 37,000 up to 39,000…of the 41,000 homes sold in August, 12,000 were completed, 15,000 were under construction, and 14,000 had not yet been started…the median new home sales price was $275,600;in August, down from $280,100 in July, while the average sales price was $347,900, up from July’s $345,100 average, as more expensive homes were in the sales mix… the Census estimated that a seasonally adjusted 203,000 new homes remained unsold at the end of August, which was a 4.8 month supply at the June sales pace, up from from a 5.6 month supply of unsold new homes in July…

the FRED graph below shows the seasonally adjusted annual rate of new single family home sales from this Census report in thousands since January 2000 in red, and the seasonally adjusted annual rate of existing home sales from the Realtors monthly over the same time period in blue…although new home sales appears to be in a uptrend, breaking out above 450,000 annually, we’d caution that the same spike was reported in May before it was revised away…this graph can also be viewed as an interactive at the FRED site, where the annualized monthly sales extrapolations for both existing and new homes will appear as you scroll across the face of the graph…

August 2014 new and 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 that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

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