March retail sales, industrial production, producer % consumer prices, and new home construction; February business inventories

most of the important monthly reports that are usually spread over two or three weeks in the middle of the month were released this week, including retail sales for March from the Census Bureau, Industrial production and Capacity Utilization for March from the Fed, the consumer price index and the producer price index for March, both from the Bureau of Labor Statistics, and New Residential Construction for March and February business inventories, also both from the Census…in addition, we also had the release of the first two regional Fed manufacturing surveys for April; the Empire State Manufacturing Survey from the New York Fed, covering New York and northern New Jersey, which reported its broadest business index turned negative for the first time since December, falling from +6.9 to -1.2, while the Philadelphia Fed Manufacturing Survey, covering eastern Pennsylvania, southern New Jersey, and Delaware, indicated ongoing modest growth as their broadest diffusion index of current manufacturing activity rose to 7.5 from last month’s 5.2..

March Retail Sales Rose 0.9% on 2.8% Higher Auto Sales

retail sales rose for the first time in 4 months in March, boosted by strong auto sales……the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales totaled $441.4 billion for the month, which was an increase of 0.9 percent (±0.5%) from the February sales of $437.6 billion, and 1.3% (±0.9%) above the seasonally adjusted sales in March of last year…February’s sales were revised up by more than 0.1%, from $437.0 billion to $437.6 billion, so on net this report met expectations of a 1% increase from depressed February levels…however, March sales were still below those of October and November, in part due to lower gasoline prices…estimated unadjusted sales in March, extrapolated from surveys of a small sampling of retailers, indicated actual sales rose 14.1%, from $390,684 million in February to $445,583 million in March, while they were up 1.6% from the $438,560 million of sales in March a year ago…

as you’re all familiar with the table from this report showing retail sales by business type that we’ve been including in this space for at least two years, we’ll again post a copy of it here…to once again explain what it shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month’s March “advance” report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called “preliminary”) as of this report, with the new January to February percentage change under “Jan 2015 r” (revised) and the February 2014 to February 2015 percentage change as revised in the 2nd column of the pair….then, the third pair of columns shows the percentage change of the first 3 months of this year’s sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of a year ago….

March 2015 retail sales table
what you can see from this table is that the increase in March sales was driven by that 2.8% increase in sales at auto dealers, but that even excluding automotive sales, other retail sales still notched a 0.4% increase…we can also easily note that big March sales increases were also scored by building material and garden supply stores, where sales rose 2.1%, and by furniture stores and by department stores, both where sales rose 1.4%…and while grocery stores saw sales fall 0.6%, most of that was due to 0.5% lower food prices in March…we’d also note that the 0.6% decrease in sales at gas stations looks to be in error, as gasoline prices were up 3.9%, so we would not be surprised to see a significant revision in that figure when the advance report for April is released a month from now….

again, the revision to February’s retail sales are in the middle pair of columns above, while the copy of them as originally reported last month is here…as you can see, the reduction of the decrease in automotive sales from 2.5% lower to 2.1% lower was a major factor in the revision that added more than 0.1% to the new reported total…other major upward revisions to February sales included gas station sales, originally reported up 1.5%, are now seen 2.3% higher, food service sales, originally reported 0.6% lower, are now shown as 0.2% higher, and drug store sales, originally reported down 0.7%, are now unchanged…meanwhile, February furniture stores sales, reported 0.1% lower last month, are now seen to be 1.2% lower, while sales at general merchandise stores were revised from down 1.2% to down 1.9%…

also note in the 3rd set of columns that although retail sales were down by 1.3% for the January to March quarter; that was entirely due to the 14.5% drop in sales at gasoline stations, which had made up around 10% of 4th quarter sales…as we saw when we reviewed the incomes and outlays report 2 weeks ago, that once falling prices were taken into account, real personal consumption expenditures for January and February made a small positive contribution to GDP….March sales are 0.9% above those, and while they will be deflated by roughly 0.3% on higher prices, real goods sales for March should add incrementally to the real PCE increase we computed at that time…

March Industrial Production Falls 0.6% on Normal Weather and Reduced Oil & Gas Drilling

industrial production fell 0.6% in March, largely on a reversal of the record jump in utility output in February….the Fed’s G17 release on Industrial production and Capacity Utilization for March showed that seasonally adjusted industrial production fell 0.6% in March after January’s decrease was revised from 0.3% to 0.4%, leaving March industrial production 1.0% below the level of December, but still 0.2% higher than a year earlier…the industrial production index, which is benchmarked to 2007 production being equal to 100.0, fell to 105.2 in March, after February’s index was revised from 105.8 to 105,9, January’s index was revised from 105.7 to 105.8, and December’s index was revised from 105.1 to 106.2…the manufacturing index, which accounts for roughly 70% of the industrial composite, eked out a 0.1% increase after falling 0.2% in February, while the manufacturing index rose from 101.1 to 101.2, after February’s manufacturing index was revised from 101.3, and January’s manufacturing index was revised from 101.5 to 101.3…the mining index, which is dominated by oil and gas drilling, fell 0.7% in March after falling 1.6% in February and 1.7% in January, but it nonetheless remains 3.7% higher than a year ago with a March index reading of 129.7…the utility index, meanwhile, fell 5.9% in March after rising 5.7% in February and 3.0% in January as our abnormal weather, the major reason for the fluctuation in this index, returned to more normal levels…

of the major market groups, production of consumer goods fell 0.6% after rising 0.6% in February, while first quarter output of consumer goods rose at a 2.5% annual rate over the 4th quarter, solely on the strength of production of consumer energy products, which were up at a 17.3% rate, while first quarter production of durable goods fell at 3.2% rate in contrast…production of business equipment rose 0.2% in March after rising 0.8% in February but was indicated to have decreased at a 2.1% annual rate in the 1st quarter, as January production had fallen 0.8%…production of construction supplies was also down at a 2.8% rate in the first quarter, after output fell 0.9% in March after falling by the same in January and 0.3% in February, while output of intermediate materials fell 0.5% in March and was down at a 0.9% annual rate in the first quarter…further breakdown on industrial production by market group can be gleaned from Table 1 and Table 4 of the report, with table 1 showing the percentage change from the prior month, quarter or year, and table 4 giving the index values for the same…

this report also covers capacity utilization, which is the percentage of our plant and equipment that was in use during the month, and which fell from 79.0% in February to 78.4% in March…seasonally adjusted capacity utilization for manufacturing industries was unchanged at 77.1% after manufacturing utilization for February was revised down from 77.3%…capacity utilization for mining fell from 85.4% in January to 84.4 in February as drilling rigs continued to be idled each week in March; finally, utilities were operating at 80.0% of capacity during March, a drop from their operating rate of 85.1% in February, as seasonally adjusted output of utilities returned to near normal…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 a handful of other special categories……for broader coverage of this report, see Robert Oak’s post Industrial Production Hasn’t Been This Bad Since Q2 2009, which includes nine FRED graphs of the most important data sets covered here..

Producer Prices Rise 0.2% in March as Wholesale Gasoline Rise 7.2%

the report on producer prices for March was pretty much in line with expectations, as the seasonally adjusted March Producer Price Index (PPI) for Final Demand indicated a 0.2% increase, as final demand for wholesale goods rose 0.3% while final demand for services increased by 0.1%, following on a 0.5% decrease in February, when lower margins for trade, transportation and warehousing dragged the services index lower…the headline year over year wholesale price change edged further into negative territory, falling from 0.6% in February to 0.8% in March, which would correspond to the greatest drop in wholesale prices since 2009..

the 0.3% increase in the index for final demand for goods was the first increase in 9 months, as a rebound in wholesale energy prices drove the index, with a 7.2% increase in wholesale gasoline outweighing decreases of 1.7% in residential natural gas and 1.9% in home heating oil…meanwhile, the index for final demand for food  fell by 0.8% with drops of 7.6% for wholesale seafood, 6.9% for wholesale fruit, and 5.1% for producer pork…eliminating the volatile food and energy indexes left core producer prices for finished goods 0.2% higher for the month, with a 1.5% increase in producer prices for industrial chemicals the largest change in any line item component…

meanwhile, the index for final demand for services rose by 0.1% after falling 0.5% in February, as both the margins for final demand for trade services and the index for final demand for transportation and warehousing services dropped 0.2%, while the index for final demand for services less trade, transportation, and warehousing services rose 0.3%…the largest increase in the services was an 11.3% increase in margins for major household appliances retailers, who have seen their margins increase by over 35% over the last 4 months…

this report also showed the price index for processed goods for intermediate demand fell by 0.1% in March, the eighth drop in a row, leaving intermediate processed goods 6.7% lower priced than a year ago….that included a 0.8% drop in the index for processed foods and feeds and a 0.2% decrease in the price index for processed goods for intermediate demand less food and energy, while prices for intermediate energy goods rose by 0.5%, their first increase in 7 months….in addition, the price index for intermediate unprocessed goods fell by 1.7%, after falling 3.9 in February and 9.4% in January and is now 26.5% below the level of a year ago, on a 1.4% drop in the index for unprocessed foodstuffs and feedstuffs, while raw energy goods also fell by 1.4% and the index for unprocessed goods less food and energy was 2.3% lower…

finally, the price index for services for intermediate demand rose 0.2% in March, as a 0.4% decrease in the index for transportation and warehousing services for intermediate demand was offset by a 0.4% increase in prices for intermediate services less trade, transportation, and warehousing and a 0.2% increase in the index for trade services for intermediate demand…over the 12 months ended in March, the price index for services for intermediate demand has risen 1.0%…

Consumer Prices Rise 0.2% on Fuel and Housing

the change in the March Consumer Price Index was also in line with expectations, as both the CPI and core prices rose by a modest 0.2%….the Consumer Price Index Summary from the BLS showed that the March 0.2% increase in overall seasonally adjusted prices followed a similar increase in February after 5 months of lower readings precipitated by the drop in oil prices, which left the all items index 0.1% lower than it was a year ago, while the index for all items less food and energy rose 0.2% for the 3rd month in a row and was 1.8% higher than a year earlier… .the unadjusted CPI-U (for urban consumers), which was set with prices of the 1982 to 1984 period equal to 100, rose to 236.119 in March from 234.722 in February, a 0.6% increase, but a level 0.07% lower than the 236.293 reading from March of last year….

the seasonally adjusted energy price index rose by 1.1% in March on 3.8% higher prices for energy commodities which was partially offset by a 1.5% drop in the index for energy services…gasoline prices were 3.9% higher and fuel oil prices rose by 5.9% while electricity prices were 1.1% lower and utility natural gas prices fell 2.7%…the seasonally adjusted food index fell by 0.2% and was reduced to 2.3% higher than a year ago as prices for food at home fell 0.5% and prices for food away from home rose 0.2%…among food at home categories, prices for fruits and vegetables fell 1.4%, leaving them 1.1% lower than a year ago, as fresh fruits saw a 2.5% decrease in prices leaving them 4.6% below a year earlier…March meat poultry and fish prices were also off by 0.5% as the pork price index fell 2.6% while other meats were mixed…in addition, the dairy price index fell 0.5%, beverages and beverage materials were 0.5% lower, while prices for cereals and bakery products rose 0.4%..the itemized list for prices of 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 items overall…other tables we usually cite include: Table 1. Consumer Price Index by expenditure category and Table 3. Consumer Price Index special aggregate indexes..

Core prices, or the price changes for “All items less food and energy” are also included on the first two tables, with price changes for commodities (aka durable and non-durable goods) preceding price changes for services…it’s here we learn that prices for all commodities less food and energy rose 0.3% in March after a 0.2% increase in February, which suggests a similar deflator will be used on retail sales for March when computing personal consumption expenditures of goods for the month….generally, retail sales excluding gas stations, restaurants and groceries will be deflated with components here, while sales from those aforementioned retailers will be deflated with their appropriate CPI index by the BEA in arriving at the price indexes for personal consumption expenditures for goods…similarly, prices for services less energy services, shown here as up 0.2% in March, will be used in computing the personal consumption expenditures price index for services…the differences between this consumer price index, and the PCE price index, then, is not in the prices for individual items, but in their weighting…the housing components of the CPI account for nearly 40% of the index, with rent and owners equivalent rent, both up 0.3% in March, accounting for nearly a third of the total index…for the PCE price index, they are prorated on their real contribution to overall consumption, which meant that for the 4th quarter, housing and utilities counted as just 17.8% of the PCE price index….

New Housing Construction Remains Stagnant in March

the March report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing starts were at a seasonally adjusted annual rate of 926,000 in March, which was 2.0 percent (±13.0%)* above the revised February estimate of 908,000 annually but 2.5 percent (±11.5%)* below the March 2014 rate of 950,000 a year…the asterisk indicates that the Census does not have sufficient data to determine whether housing starts rose or fell for the month or over the past year, thus indicating ongoing weakness in new construction….the annual rates given in the headline change are extrapolated from a survey of a small percentage of permit offices visited by Census field agents which estimated that 77,400 housing units were started in March, up from 63,600 in February, which was initially reported as 62,400 starts…single family houses accounted for 52,500 of the March starts, while 23,200 were units in apartment buildings with 5 or more units…8,100 of those were started in the Northeast, up from 2,900 in February, while March starts fell in the South and the West, so while February’s weakness may have been weather related, it does not appear that March was so affected..

as we’ve noted previously, the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new construction trends than the volatile and often revised starts data… in January, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,039,000, which was 5.7 percent (±2.0%) below the revised February annual rate of 1,102,000, but was 2.9 percent (±0.9%) above the estimate of March in last year…so while up from last year, new permits issued in March were below the level of January and February….those estimates were extrapolated from the unadjusted estimate which showed 90,900 new permits issued in March, which was up from the estimated 77,500 new permits issued in February, so the seasonal adjustment was a major factor in the headline change on permits…

February Business Inventories Rose 0.3% on Flat Sales

following the release of retail sales report, Census released the composite Manufacturing and Trade Inventories and Sales report for February, which is covered in the media as the “business inventories” report, and which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers’ shipments was at $1,313.1 billion in February, virtually unchanged (±0.2%) from January, but down 1.2 percent (±0.4%) from the total monthly sales of February of last year, mostly due to lower prices for energy goods…manufacturers sales were estimated at $481,345 million, 0.7% higher than January, retailer’s sales were estimated to be down 0.5% at $387,541 million, and sales of merchant wholesalers were down 0.2% and accounted for $444,240 million of the overall total….

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be at a seasonally adjusted $1,790.2 billion at the end of February, 0.3% (±0.1%) higher than January, which was up 3.3 percent (±0.4%) from February a year earlier…seasonally adjusted inventories of manufacturers were estimated to be valued 0.1% higher at $650,961 million, inventories of retailers were estimated to be 0.4% higher and valued at $565,236 million, and inventories of wholesalers were estimated to be valued at $574,010 million at the end of February, up 0.3% from January…the month end total business inventories to total sales ratio, the metric which is widely watched to determine if inventories are becoming excessive, was at 1.36, unchanged from January but up from 1.30 in February a year ago, again likely distorted by record high petroleum inventories, which is being stored to take advantage of low prices… remember, before inclusion in GDP, each component of inventories needs to be adjusted with the appropriate price change from the CPI or PPI to arrive at the change in real 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…)

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April 18 graphics

March retail sales:

March 2015 retail sales table


wellhead and benchmark oil prices:

April 2015 quoted and wellhead oil prices

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February job openings, consumer credit, wholesale sales & inventories, and Mortgage Monitor

  there were just a few minor government economic releases this week; the Wholesale Trade Sales and Inventories report for February from the Census, and the import and export price index for March and the February Job Openings and Labor Turnover Survey, both from the BLS, and the G-19 on consumer credit from the Fed…in addition, the Institute for Supply Management (ISM) released it’s March Non-Manufacturing Report On Business, wherein their NMI (non-manufacturing index) printed at 56.5 percent in March, down from the February reading of 56.9 percent, still indicating that a plurality of the managers surveyed saw expansion in the various facets of their business…and the week also saw the release of the February Mortgage Monitor from Black Knight Financial Services, formerly LPS, which gave us a few new graphics to look at…

February Job Openings at 14 Year High

the February Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 168,000 to 5,133,000 at the end of February, the most openings in any month since January 2001…job openings as a percentage of the employed labor force rose to 3.5% from 3.4% in January, and up from 2.9% in February a year ago…the increase in openings was widespread among industries, with the 37,000 new jobs in accommodation and food services topping the list…like most BLS releases, the press release for report is very readable and also refers us to the associated table for the data cited, linked at the end of the release…thus in Table 1. Job openings levels and rates by industry and region, where we also see that the entire increase in job openings was in the Midwest and West, while job openings in the South declined…

this 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 February, seasonally adjusted new hires totaled 4,916,000, down 78,000 from the 4,994,000 hired or rehired in January, as the hiring rate as a percentage of all employed remained unchanged at 3.5%, but was up from the 3.4% hiring rate in February a year earlier… separations also fell, from 4,834,000 in January to 4,650,000 in February, as the separations rate as a percentage of the employed fell from 3.4% to 3.3%, but was unchanged from a year ago…subtracting the 4,650,000 total separations from the total hires of 4,916,000 would imply an increase of 266,000 jobs in February, virtually equal to the revised payroll job increase of 264,000 for February reported by the BLS establishment survey last week

breaking down the seasonally adjusted job separations, the BLS finds that 2,687,000 quit their jobs in February, down from the revised 2,779,000 who quit their jobs in January, while the quits rate, widely watched as an indicator of worker confidence, fell from 2.0% to 1.9% of total employment… addition to those who quit, another 1,591,000 were either laid off, fired or otherwise discharged in February, down from the 1,722,000 discharges in January, which also lowered the discharges rate from 1.2% to 1.1% of all those who were employed during the month….meanwhile, other separations, which includes retirement and death, were at 373,000 in February, up from 333,000 in January, for an ‘other separations’ rate of 0.3%, which was unchanged…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

February Credit Card Balances Decline on Lower Gas Prices

the Fed’s G.19 Release on Consumer Credit for September indicated that total seasonally adjusted consumer credit outstanding increased by $15.52 billion to $3,343.4 billion, or at a 5.6% annual rate… the revolving credit portion of the aggregate, which would mostly be credit card debt, fell by $3.7 billion, or at a 5.0% annual rate, to $884.8 billion, the greatest drop in four years, while non-revolving credit, which includes loans for cars and college tuition but not borrowing for real estate, rose at by $19.2 billion to $2,458.6 billion, an annual growth rate of 9.4%….the increase in credit outstanding for January was revised lower, from the initially estimated $11.56  billion increase to an increase of $10.8 billion, with revolving credit falling at a 1.4% rate in that month too…although the financial press reports this as a pull back on credit card debt, it more than likely simply reflects lower prices for gasoline and hence smaller monthly balances for the majority of consumers who buy gas with credit cards…

February Wholesale Sales Down 0.2%, Wholesale Inventories Up 0.3%

for the third month in a row, the Wholesale Trade, Sales and Inventories Report (pdf) from the Census Bureau indicated that wholesales sales fell in February from the prior month, but unlike December and January, when falling prices for oil related products were the major factor, February saw wholesale price increases for refined products, while the largest decreases in wholesale sales were in the durable goods categories…seasonally adjusted sales of wholesale merchants were estimated at $444.2 billion in February, down 0.2 percent (+/-0.5%) from the revised January level and down 1.5 percent (+/-1.2%) from the wholesale sales of February last year….moreover, the January preliminary estimate was revised downward $1.6 billion or 0.3 percent, and sales are now indicated as a seasonally adjusted 3.6% lower than December, with January’s wholesale sales of durable goods down 2.1% and wholesale sales of nondurable goods excluding petroleum products down 2.2%…for February, wholesale sales of durable goods fell by 2.4 percent (+/-0.7%) from January, but were up 3.5 percent (+/-1.2%) from a year ago, with sales of electrical and electronic goods down 5.0% and only hardware, plumbing and heating equipment seeing an increase in February…meanwhile, wholesale sales of nondurable goods were up 1.9 percent (+/-0.7%) from January, but were down 5.8 percent (+/-1.6%) from last February, as petroleum and petroleum products were up 5.5%, largely on higher prices and sales of drugs and druggists’ sundries were up 4.0% despite fairly stable wholesale prices

this release also reported that seasonally adjusted wholesale inventories were valued at $574.0 billion at the end of February, 0.3% (+/-0.4%)* higher than the revised January level and 6.1% (+/-1.2%) above last February’s level, while January’s preliminary inventory estimate was upward by $1.0 billion or 0.2% and thus 0.4% higher than December…wholesale durable goods inventories were up 0.3 percent (+/-0.5%)  from January and up 7.6 percent (+/-1.6%) from a year earlier, as wholesale automotive inventories rose 2.4% and are now 12.6% above a year ago….inventories of nondurable goods were up 0.2% (+/-0.4%)* from January and were 3.8 percent (+/-1.6%) higher than last February, as wholesale inventories of petroleum and petroleum products were up 2.4% while inventories of chemicals and allied products were down 2.9%…the closely watched inventory to sales ratio of merchant wholesalers was unchanged at 1.29, and although it was up from the inventory to sales ratio of 1.20 in February of last year, that was a time when the higher sales of petroleum products vis a vis inventories counted as a much larger percentage of the overall ratio..  

Average Delinquency in Foreclosure Slips to 1,002 Days; 52% Have Been Delinquent More Than 2 Years

according to the Mortgage Monitor for February (pdf) from Black Knight Financial Services (BKFS, formerly LPS Data & Analytics), there were 799,956 home mortgages, or 1.58% of all mortgages outstanding, remaining in the foreclosure process at the end of February, which was down from  814,513, or 1.61% of all active loans that were in foreclosure at the end of January, and down from 2.22% of all mortgages that were in foreclosure in February of last year…these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and February saw this so-called “foreclosure inventory” drop below 800,000 in February for the first time since late 2007…new foreclosure starts also fell in February to 79,740, from 94,347 in January, the lowest since 78,796 foreclosures were started in April a year ago and below the 99,193 foreclosures that were started in February of last year…

in addition to homes in foreclosure, February BKFS data showed that 5.36% of all mortgages, or 2,712,538 mortgage loans, were at least one mortgage payment overdue but not in foreclosure, down from 5.56% of homeowners with a mortgage who were more than 30 days behind in January, and down from the mortgage delinquency rate of 5.97% a year earlier…of those who were delinquent in February, 1,067,411 home owners, or 2.11% of those with a mortgage, were considered seriously delinquent, which means they were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month…thus, a total of 6.94% of homeowners with a mortgage were either late in paying or in foreclosure at the end of January, and 3.79% of them were in serious trouble, ie, either “seriously delinquent” or already in foreclosure at month end…

the first graph below, from page 5 of the Mortgage Monitor, shows the history of the mortgage crisis, including the aforementioned foreclosure inventory and percentage of delinquent mortgages, since the beginning of 2003…the percentage of mortgages that were in the foreclosure process monthly over that period is shown in green, the percentage of active home loans that were delinquent but not in foreclosure over the same period is shown in red, and the total of both, representing total percentage of mortgages that were in some kind of mortgage trouble each month, is shown 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 past three years and at 1.58% in February is now well below the October 2011 peak of 4.30% of mortgages in the foreclosure process…but notice that’s still more than 175% over the pre-crisis foreclosure inventory as noted in the callout 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 5.36% of all mortgage outstanding in February 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 17% above the pre-crisis mortgage delinquency percentage as noted on the graph..thus the total percentage of all non-current mortgages as shown at 6.94% in blue is well below the peak of 14.36% percent that were non-current logged in January of 2010, when more than 1 out of 7 mortgages were in trouble, but it’s still well above the 4.71% average who were in some mortgage trouble in December 2005, well before the crisis took hold…

February 2015 LPS delinquent and foreclosure history

while the total count of mortgages that are in trouble has been declining, the average length of time that those who are in trouble have been there remains elevated…the next graph below, from page 6 of the mortgage monitor, shows for each month since 2005 the average number of days that new foreclosure starts have been delinquent in green, the average number of days that seriously delinquent mortgages (90+) have been  delinquent in violet, and the average number of days those homes in the foreclosure inventory have been delinquent in red…while the average number of days delinquent for a loan in the foreclosure process has declined to 1,004 from a high of 1,024 in October, the average number of days delinquent for loans 90 or more days delinquent has risen to 531 days, after declining to 490 in October…BKFS suggests this may be due to homes previously in foreclosure shifting back to a seriously delinquent status, possibly after a mortgage modification….they also note that as of the end of February, over 52% of homes in foreclosure had been delinquent for more that 2 years…

February 2015 LPS days as delinquent and in foreclosure inventory

the last graph we’ll look at from this month’s report, from page 12 of the pdf, shows the 15 states with the highest percentage of distressed sales in 2014…generally, these include short sales by a delinquent homeowner that are agreed to by mortgage holder as a resolution in lieu of foreclosure, or the sale of a previously foreclosed home from the bank’s inventory of same (NB: this is not a “foreclosure sale”, which is the confusing mortgage industry term for the auction that completes the foreclosure and transfers the title to the bank’s REO (real estate owned) portfolio)…while 12.7% of home sales in 2014 were distressed, down from 17% of all sales in 2013, the lion’s share of them were concentrated in just a handful of states, with Florida, California, Illinois and Michigan accounting for over half of all such transactions in 2014…the bar graph below shows that distressed sales accounted for 24.7% of real estate transactions in Florida, 20.3% of sales in Illinois, 19.0% of sales in Nevada, 16.5% of sales in Maryland, 14.4% of sales in Connecticut, 13.9% in Michigan, 13.8% in Georgia, and 13.5% of home sales in Kentucky…by itself, Florida accounted for 26 percent of all distressed sales in the U.S.

February 2015 LPS states with highest distressed sales

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

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April 11 graphics

delinquent and foreclosure inventory history:

February 2015 LPS delinquent and foreclosure history

average days delinquent for 90 day and foreclosure inventory:

February 2015 LPS days as delinquent and in foreclosure inventory 

percentage of distress sales by state:

February 2015 LPS states with highest distressed sales

April oil inventories:

April 2015 crude oil stocks

April gasoline inventories:

April 2015 gasoline stocks

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guestimating 1st quarter GDP from 2 months of personal consumption, trade, construction spending and factory inventories data

in addition to the Employment Situation Summary for March from the Bureau of Labor Statistics, this week also saw the release of four reports that together will make up the lion’s share of the February contribution to 1st quarter GDP: the February release on Personal Income and Spending from the Bureau of Economic Analysis, the February Report on our International Trade, the Full Report on Manufacturers’ Shipments, Inventories and Orders for February and the February report on Construction Spending, all from the Census Bureau…as we did when those 4 reports were released for January, we’ll look at them to see how they might affect first quarter economic growth figures… other popular reports released this past week included the S&P/Case-Shiller House Price Indexes for January, which reported a 4.5% year over year increase in its national index, and the March Manufacturing Report On Business from the Institute for Supply Management (ISM), which saw its broad purchasing managers index (PMI) fall to 51.5, the lowest reading since May 2013…and in the last of the regional Fed manufacturing reports for the month, the Dallas Fed Manufacturing Survey for March saw its broad business activity index decrease by 6 points to -17.4, indicating a not unexpected ongoing contraction in the oil patch…

March Jobs Report the Worst in Nearly 3 Years

the Employment Situation Summary for March from the BLS indicated that employers added a seasonally adjusted 126,000 jobs in March, making it the worst month since December 2013…in addition, January and February jobs totals were revised down 69,000, so on net we only gained 57,000 spots from the total reported last month; we’d have to go back to June 2012 to find another month that bad…moreover, the household survey saw another 277,000 drop out of the labor force, bringing the number of those not counted up to a record 93,175,000..thus, the labor force participation rate fell back to 62.7%, which appears to equal the lowest since February 1978…it’s hard to believe that we could go from such a great series of employment reports to this bad in just one month, but most of the other data has looked weak, so we shouldn’t be surprised…

the BLS press release itself is very readable, so you can get further details from there…note that almost every paragraph in that release points to one or more of the tables that are linked on the bottom of the release, and those 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….thus, when you encounter a line such as “The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 2.6 million in March”. (See table A-12.) you can quickly open Table get the details on what the change really was….for those who want to see some associated graphics, it looks like The March Jobs Report in 11 Charts from the Wall Street Journal is the best we have this week…

Real Personal Consumption Expenditures Growing at a 1.56% Rate Year to Date

the key report in determining the trajectory of GDP is the monthly report on Personal Income and Outlays from the Bureau of Economic Analysis, which give us the monthly data on our personal consumption expenditures (PCE), the major component of GDP, and the PCE price index, 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 that spending indicated…the report also gives us monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate…however, the dollar amounts reported are not the February change, but they’re seasonally adjusted and at an annual rate, ie, they tell us what income and spending would be for a year if February’s adjusted income and spending were extrapolated over an entire year…confusingly, however, the percentage changes are computed monthly, and in this case they give us the change in each metric from January to February…and of course the price index changes are also reported on both a month over month and year over year basis..

so when the opening line of the press release for this report tell us “Personal income increased $58.6 billion, or 0.4 percent, and disposable personal income (DPI) increased $54.2 billion, or 0.4 percent, in February“, they mean that the annual figure for personal income of February was 0.4% greater than the annual personal income figure for January; the actual February increase in personal income over January is not given…similarly, disposable personal income, which is income after taxes, rose at by 0.4%, from an annual rate of $13,265.6 billion in January to an annual rate of $13,319.8 billion in February…the contributors to the increase in personal income, listed under “Compensation” in the press release, are also annualized amounts, all of which can be seen in the Full Release & Tables (PDF) for this release…so when the press release says, “Wages and salaries increased $23.9 billion in February” that really means wages and salaries would rise by $23.9 billion over an entire year if February’s increase were extrapolated over an entire year…so you can see what’s written here is nearly inscrutable, and often leads to misreporting the data the same way the BEA describes it…

for the personal consumption expenditures (PCE) that we’re interest in, BEA reports that they increased $11.8 billion, or 0.1 percent, which means the annual rate of PCE rose from $12,093.5 billion in January to $12,105.3 in February, while December’s PCE were revised to a $12,122.0 annual rate, still statistically 0.2% higher than January…but as we 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 included in this report, which is a chained price index based on 2009 prices = 100….looking at Table 9 in the pdf, we see that that index rose to 108.281 in January from 108.301 in December, giving us a month over month inflation rate of 0.17%, which BEA reports as a 0.2% increase, in contrast to the 0.4% decrease of January…

now, when each of those price indexes are applied to that month’s annualized PCE, it yields that month’s annualized real PCE in chained 2009 dollars, which aren’t really dollar amounts at all but merely 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 February’s chained consumption works out to 11,158.6 million, 0.07% less than January’s 11,166.8 million, which the BEA rounds to a 0.1% decrease in real PCE… (labeling chained dollar amounts with a “$” doesn’t seem right, because they are closer to a quantity index)

however, for estimating the change in GDP, the month over month change doesnt buy us much; we have to compare January and February to the results of October, November and December…always thoughtful as they are, the BEA provides the annualized chained dollar PCE for those three months in the GDP report , as revised last Friday…in table 3 of the pdf for the GDP report, we see that the annualized real PCE for the 4th quarter was represented by 11,119.6 million in chained 2009 dollars…since we dont yet know real PCE for March, the conventional method of estimating the 1st quarter change in real PCE is to average the two months we do have and compare it to that…when we do, we find that real PCE has grown at an annual rate of 1.56% so far this year, over the 4th quarter of 2014…note the math: (((11,158.6 +11,166.8 ) / 2) / 11,119.6 ) ^ 4 = 1.01559453…given that real PCE is about 68% of GDP, we would thus estimate that real PCE would add 1.06 percentage points to 1st quarter GDP…

Real Year to Date Goods Exports Down at a 25.7% Rate, Goods Imports Down at a 24.7% Rate

February trade figures appear to have been impacted by the west coast dock strike (which has since been settled); nonetheless, the results are included in our national product accounts without an asterisk, just like weather related impacts of any other unplanned economic disruptions…the February report on our international trade in goods and services showed that our seasonally adjusted goods and services deficit fell by $7.2 billion to $35.4 billion, down from the revised January trade deficit of $42.7 billion, as our February exports fell $3.0 billion to $186.2 billion, and our February imports fell $10 2 billion to $221.7 billion…our exports of capital goods fell by $1.66 billion on a $628 million drop in exports of civilian aircraft; our exports of industrial supplies fell by $1.41 billion on decreases in exports of non-monetary gold, crude oil, fuel oil & plastics exports, and our automotive exports fell by $1.09 billion…we imported $2.6 billion less capital goods, $1.45 billion less consumer goods, and despite a 12.5% increase in prices for imported crude oil, imports of crude fell by $2.28 billion, leading a $4.35 billion drop in imports of industrial supplies and materials…itemized lists of the value of our monthly and year to date exports and imports can be viewed in exhibit 7 and exhibit 8 of the full pdf for this release

what we would normally do to estimate the impact of these trade figures on GDP would be to adjust each with the appropriate price for that item or category from the Import and Export Price Indexes for February, quite a tedious process…however, this week we’ve noticed that exhibit 10 in the full pdf for this report gives us ready to use monthly goods trade figures by end use category and in total in chained 2009 dollars (mea culpa, easy to miss in a 54 page pdf)…since the February change in export of services and imports of services was less than $0.1 billion in both cases and will not impact GDP much, we can go right to that table to make our estimates..

as you’ll recall, all data in the GDP report is at an annual rate, so we’ll have to compute an annual rate with the monthly data we have…our seasonally adjusted exports of goods in chained 2009 dollars for October, November and December were $124,329 million, $123,379 million, and $123,120 million respectively; hence, our inflation adjusted goods exports in the 4th quarter were at an annual rate $1.483 trillion; our inflation adjusted goods exports for January and February totaled $232,660 million, or at a $1.396 trillion annual rate….that would amount to a 5.9% quarter over quarter drop in our exports, meaning that our real 1st quarter to date goods exports have fallen at 25.7% annual rate…since goods are about 2/3 of our total exports, that would indicate we could estimate that 1st quarter exports have fallen at a 17.1% annual rate, or at a rate that would subtract 2.24 percentage points from 1st quarter GDP..

meanwhile, our seasonally adjusted imports of goods in chained 2009 dollars for October, November and December were $174,028 million, $172,042 million, and $177,145 million respectively, thus, our real 4th quarter imports of goods were at a $2.093 trillion annual rate…our total real imports of goods for January and February combined were $329,017, or at a $1.974 trillion annual rate…that means our inflation adjusted imports of goods fell by 5.7%, or at a 24.7% annual rate…since our imports of services, virtually unchanged, count for about 2/9ths of our total imports, we could estimate that our overall 1st quarter imports fell at a 19.2% annual rate, or at a rate that would add 2.99 percentage points to 1st quarter GDP…

Year to Date Real Construction Spending Also Down

in their report on February construction (pdf), the Census Bureau estimated that our seasonally adjusted construction spending would work out to $967.9 billion annually if extrapolated over an entire year, which was 0.1% (±1.2%)* below the revised January annual rate but 2.1 percent (±1.6%) above the estimated adjusted and annualized level of construction spending of February last year…January’s spending estimate was revised from $971.4 to $967.9 billion, which means the January drop in construction spending now works out to 1.7% lower than December, not the 1.1% drop originally reported…..private construction spending was at a seasonally adjusted annual rate of $698.2 billion, 0.2 percent (±1.0%) above the revised January estimate, with residential spending falling to an annual rate of $349.9 billion, 0.2 percent (±1.3%) below the revised January estimate while non-residential construction rose 0.5 percent (±1.0%) to $348.4 billion…meanwhile, public construction spending was estimated at  $268.9 billion annually, 0.8 percent (±2.0%) below the revised January estimate, with public power, water and sewage construction all off substantially….

construction spending inputs into 3 components of GDP; investment in private non-residential structures, investment in residential structures, and into government investment, for both state and local and Federal governments…as we pointed out a month ago, the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators for the various components of non-residential investment, while they use the Census Bureau construction price indexes for new one-family houses under construction and for new multi-family homes under construction for residential investment…while the later indicates 0.4% monthly inflation for residential, the best we could estimate for the price change for other types of construction would be to use the same deflator as was used in the last GDP release, which worked out to be a one month deflator of 0.1% for public and non-residential construction, figuring construction prices were not very volatile over a few months…furthermore, because the GDP categories for construction spending include brokers’ commissions, title insurance, state and local taxes, attorney fees, title escrow fees, fees for surveys and engineering services, and remodeling not captured by this report, we had to generate our own quarter to quarter comparisons from the data included here…

thus, using the monthly annualized data for October, November and December, we find that 4th quarter residential construction spending was at a seasonally adjusted annual rate of $353,565 million, and that the average of residential construction for January and February reduced by the 0.4% monthly deflator was $353,704 million…thus we’d estimate that residential construction has barely eked out a 0.16% annual rate of increase in the 1st quarter, a change so statistically small that it would not have a noticeable impact on GDP growth…for private non-residential construction, we find that 4th quarter non-residential construction was at a $350,928 million annual rate, while averaging January and February deflated by 0.1% per month gives us 1st quarter non-residential construction at a $346,911 million annual rate…hence, investment in non-residential structures is down at a 4.5% annual rate so far in the 1st quarter, a decrease which would subtract .13 percentage points from first quarter GDP should it persist…finally, we find that public construction averaged at a $280,647 million annual rate over the 4th quarter, while public construction for January and February adjusted for inflation works out to a $269,553 million annual rate…hence, government investment spending is down at a 14.9% annual rate so far in the 1st quarter, a decrease which would subtract .29 percentage points from the change in 1st quarter GDP should it continue…

Change in Real Factory Inventories Slows Year to Date

the last report from this week that we’ll look at with an eye as to how it might affect first quarter growth figures is the Full Report on Manufacturers’ Shipments, Inventories and Orders for February( pdf) from the Census Bureau, which usually goes by just “factory orders” in the business press, although new or unfilled orders aren’t our concern today, as we’ll be looking at shipments of equipment and inventories…this report did indicate that new orders for manufactured goods rose for the first time in 7 months, increasing $0.8 billion or 0.2 percent to $468.3 billion, as new orders for non-durable goods rose by 1.8%, due in part to a rebound in prices for refinery products…unfilled orders, on the other hand, were down for the 3rd month in a row, falling by $5.9 billion or 0.5 percent to $1,156.3 billion…nonetheless, unfilled factory orders are still running 8.4% above those of a year ago, so there shouldn’t be any general factory slowdown in the offing as a result of recent orders downturn..

factory shipments rose for the first time in 5 months in February, increasing $3.6 billion or 0.7 percent to $481.3 billion, on the heels of a 2.3% decrease in January…shipment of durable goods fell by 0.2% on a 1.3% decrease in shipments of primary metals, a decrease that may have more to do with price than quantity…shipments of non-durable goods rose by 1.8%, largely on a 11.3% increase in shipments from refineries…however, most of the shipments reported here will be included in one of the other components of GDP, such as those destined for export, personal or government consumption, and not directly included as reported here…the one exception is that the investment in equipment component of GDP, that can be guessed at from shipments of non-defense capital goods in these census reports…shipments of non-defense capital goods rose to $80,139 billion in February from $80,098 billion in January; that’s an increase of a bit more than 0.1% after a 0.8% increase in January…producer prices index for a wide variety of equipment with no overall index aren’t very useful in determining a deflator, but table 4 from the GDP pdf indicates prices for equipment rising at a 0.6% rate in 2014 and at a 1.2% annual rate in the 4th quarter, so we’d guess equipment prices would likely still rise on the order of 0.1% a month early this year….as shipments of non-defense capital goods averaged $79.43 billion in the 4th quarter, that would indicate that inflation adjusted shipments of capital goods rose at a 2.9% annual rate in the first quarter….if we use that as a proxy for the 1st quarter increase investment in equipment, it would add .18 percentage points to GDP..

factory inventories, meanwhile, rose by $0.9 billion or 0.1% to $651.0 billion in February after a 0.4% decrease January, which was at least in part to lower priced inventories at refineries…the change in factory inventories is included directly in GDP, along with other retail, wholesale and farm inventories, and we want to know if the change in inventories in the 1st quarter is greater than or less than the change in inventories was in the 4th quarter…however, as we explained 3 weeks ago, companies use a wide variety of accounting methods in valuing their inventories, such as LIFO, FIFO, average cost or weighted average cost, all of which the BEA adjusts for before including that in the NIPA data (see the National Income and Product Accounts Handbook, Chapter 7 (22 pp pdf), for details), and furthermore, some of that inventory does not move off the “shelf” month to month and hence is not revalued…hence, the quick & dirty trick of deflating inventories with an appropriate index from the current producer price index that we’ve used in the past is faulty, and we know of no easy way to estimate for all the inputs that the BEA uses in computing this change…so while we found that real factories inventories probably rose 0.4% in January, we used the simple deflators from the producer price index to arrive at that conclusion…

using a similar method on February durable goods inventories, which were up by 0.3% while prices were up 0.1%, we’d estimate real durable inventories rose 0.2%, a smaller change than the 0.5% monthly increase seen for durable inventories over the 4th quarter…non durables is more complicated, as producer prices for food and energy inventories must be applied separately…food and beverage inventories, at various stages of processing, fell by 0.4% and 0.2% respectively, and they account for about 20% and 10% of non-durable factories inventories respectively…meanwhile February producer prices for finished foods fell 1.6%, while producer prices for intermediate foods fell 1.9%…thus we could estimate that real food inventories at factories likely rose by at least 1.0%, and possibly by as much as 1.5%…refinery inventories, which now account for less than 15% of non-durable factory inventories, increased by 1.1%, while producer prices for energy goods were up 0.6%; hence real energy goods inventories increased by roughly 0.5%…meanwhile all other non-durable inventories appear to have fallen by less than half a percent, while the price index for nondurable consumer goods less foods and energy rose 0.2%, which would hence suggest at least a 0.2% contraction in real inventories of such non-durable goods…overall, then, real factory inventories appear to have grown at a slower pace in January and February than they did in the 4th quarter, with the caveat that we have certainly mispriced a portion of those inventories for the reasons that we set out in the previous paragraph..

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

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April 4th graphics

Bakken routes through Ohio:

Bakken crude routes through Ohio

crude by rail, 2014 barrels per day:

Crude by Rail movements 2014

January crude oil shipments between PADDs:

January 2015 movements of crude by rail table

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4th quarter GDP graph

3rd estimate, 4th quarter GDP:

4th qtr 2014 3rd estimte GDP

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