April 30 graphics

oil prices:

April 30 2016 oil prices

rig counts:

April 29 2016 active rig counts

oil inventories:

April 22 2016 oil inventories for April 30

Q1 GDP:

1st quarter 2016 advance GDP

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what we learned from Doha, a new push for gas exports, new oil glut and rig count records again, etc

the meeting at Doha was a dud…there was no agreement between OPEC and other oil producers meeting at the Qatari capital last Sunday to freeze production or to take any other action whatsoever to control oil output…in fact, contrary to their intended purpose of limiting oil output, both the Saudis and the Russians indicated after the meeting that they’d be increasing their output… furthermore, now that we understand the issues in play, we can see that there is no chance that there’ll be any kind of agreement to freeze oil production at any time in the foreseeable future…

initial news from the conference early Sunday was that the 16 oil producers meeting in Doha, including the Saudis and the Russians, would agree to freeze their oil output until October, at which time they’d have another meeting and renegotiate from there…but before the meeting actually started, the Saudis said they wanted all OPEC members to participate, including Iran, despite previously insisting on excluding Iran because Iran had refused to freeze production….so they delayed the meeting till later in the afternoon in an attempt to address the differences between the Saudis position and the earlier draft agreement which excluded Iran….but that was to no avail, as the Saudis were uncompromising, and by evening the meeting fell apart without a freeze agreement or even an agreement to meet again at some time in the future…the early Asian market reaction, wherein quotes for U.S. crude for May fell 6.7% to $37.70 a barrel and the global benchmark Brent crude was down 6.9% to $40.14, was short-lived, as news that oil workers in Kuwait went on strike, threatening to take nearly 2 million barrels per day off the global market, steadied prices, which then closed Monday at $39.78 a barrel in the US and at $42.91 a barrel in Europe, both down less that one percent from last Friday…

now that the dust has settled, it’s pretty clear what had happened….over the 2 months leading up to the meeting, confidence that a deal to freeze output would get done was pretty high, as both Russian energy minister Alexander Novak and Ali al Naimi, the long time Saudi oil minister, had taken part in the original meeting with Qatar and Venezuela, and had voiced support for an agreement in the interim weeks…however, at the same time, and especially during the week prior to the Doha meeting, 30 year old Saudi Crown Prince Mohammed bin Salman insisted there would be no deal without Iran’s participation…we can now see that it was bin Salman who was calling the shots at last Sunday’s meeting….the tell is from reports from Venezuela oil minister Del Pino, who said that Saudi representatives at Sunday’s meeting didn’t have authority to negotiate a freeze, and hence they followed the dictates of bin Salman, and presumably his father the king, that there would be no deal unless their regional arch enemy Iran was also forced to freeze their output (at depressed levels)

thus, young Mohammad bin Salman has emerged as the power behind the Saudi crown…his father King Salman, who rose to the throne when King Abdullah died last January and who has often been described in reports as somewhat senile, is still active domestically, presiding over the largest jump in political beheadings in 20 years…but his favored son Mohammend, who often speaks of Saudi Arabia in the first person singular, has been gradually assuming all the important positions in the Kingdom, including Minister of Defense and Chief of the Royal Court…the outcome of this meeting at Doha confirms that he is in charge of Saudi energy policy as well, and that Ali al Naimi, who for 21 years has not only been the Saudi oil minister but also the voice of OPEC, is now answering to the young Crown Prince…fighting proxy wars with Iran in Syria and Yemen, the Saudis thus appear willing to cut off their nose to spite their face, and will do all in their power to drive the price of oil down, just to deny Iran full remuneration for their oil as they return to the global export markets…

New Energy Bill Fast Tracks Gas Export Facilities

back in the US, the Republican controlled US Senate passed a broad-ranging energy bill promoting everything from renewable energy to exports of fossil fuels by an 85-12 votedelayed for 2 months over an impasse on providing emergency aid to Flint, this so-called Energy Policy Modernization Act had broad bi-partisan support because it was turned into a Christmas tree with something on it for everyone, including a provision to designate forests as a carbon-neutral energy source that was introduced by senators Susan Collins from Maine and Amy Klobuchar from Minnesota, presumably at the behest of their timber interests…the earlier House passed version of this bill was more aimed at restricting Federal oversight and thus drew a veto threat from the White House, so it appears that this Senate version will be closest to what survives the reconciliation process and ends up as law..

while there’s undoubtedly much pro and con in this bill that we haven’t seen, what has attracted our attention are the provisions to speed the permitting process for liquefied natural gas exports…when i first read about those provisions, i assumed they were similar to others that had been included in other energy proposals, wherein a permit to build an export facility had to be granted within a year after a completed application, but i serendipitously stumbled onto SEC. 2201 in the text, under “Action on applications to export liquefied natural gas” which reads in part  “the Secretary shall issue a final decision on any application for the authorization to export natural gas under section 3(a) of the Natural Gas Act (15 U.S.C. 717b(a)) not later than 45 days after the later of— (1) the conclusion of the review to site, construct, expand, or operate the liquefied natural gas export facilities required by the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.); or(2) the date of enactment of this Act.”  thus it’s clear that someone seems to be in quite a hurry to get those LNG export facilities built and start shipping our natural gas to Asia and Europe, where gas prices still remain much higher than in the US…

that provision is particularly important to us here in Ohio because we are on the cusp of becoming the fastest growing natural gas producing state in the nation…last Friday, in the “Today in Energy” blog post from the Energy Information Administration (EIA) titled U.S. natural gas production reaches record high in 2015, they examined the states that are contributing the most growth to the increased output of natural gas in the US in 2015, and Ohio came in second, just a bit behind Pennsylvania…but while growth of natural gas production is slowing in Pennsylvania, it is still growing in Ohio, a fact which is most clearly illustrated by a bar graph from that EIA post which we’re including below…

April 16 2016 natural gas by state

the above bar graph was taken from the EIA “today in energy” blog post of last Friday and it shows the 5 states that have contributed the most to the increase in natural gas output over the past six years…the annual increase in the output of gas in billions of cubic feet per day is represented by a bar for each of those 6 years for each of those 5 states (in some cases as a negative)…understand, Texas still produces more gas than Pennsylvania, but Texas gas output is falling, and this graphic only shows the states where the major growth has been….in 2015, Pennsylvania’s natural gas output grew by 1.5 billion cubic feet a day, down from the 2.6 billion cubic feet a day growth the state logged in 2014…meanwhile, Ohio’s natural gas output grew by 1.4 billion cubic feet a day, up 41% from the less than 1 billion cubic feet a day growth we saw in 2014…assuming these trends continue, Ohio’s natural gas output growth will almost certainly surpass the growth of Pennsylvania natural gas in the coming year…thus, while the LNG exports that may be leaving from the Gulf Coast, New Jersey or Washington state will not necessarily have originated in Ohio, it will be Ohio where the rest of the country will be looking for the new gas to pick up the supply deficit created by those exports…

The Latest Oil Stats from the EIA

according to the latest reports from the Energy Information Administration, our imports of oil increased by nearly a quarter of a million barrels per day, which was almost the same amount of oil that we added to our record supplies of oil in storage over that period….however, oil traders took note of an even larger drawdown of our inventories of distillates, and drove the new June contract price of oil up to $43.73 a barrel, a new high for the year, despite the Doha failure earlier in the week…also contributing to the strength in the price for oil was another decrease in the rig count, and a 24,000 barrel per day drop in our field production of crude oil, which fell to an average of 8,953,000 barrels per day during the week ending April 15th, which was 4.4% lower than the 9,366,000 barrels per day we were producing during the same week last year…output of oil from US fields has now fallen 12 out of the last 13 weeks and is now 6.8% off the peak of last June 10th, the lowest it’s been since the week ending October 10th of 2014…

at the same time, our imports of crude oil averaged 8,178,000 barrels per day during the week ending the 15th, 247,000 barrels per day higher than the previous week and 5.4% higher than the 7,765,000 barrels per day we were importing during the week ending April 17th last year…but as this week replaced an even higher import week in the 4 week moving average of imports reported by the weekly Petroleum Status Report (62 pp pdf), and thus our oil imports still remain at the 7.8 million barrel per day level, just 2.1% above the same four-week period last year…   

meanwhile, US refineries, which had slowed processing by nearly a half a million barrels per day last week, picked up a bit this week, processing 16,104,000 barrels of oil per day during the week ending April 15th, 163,000 barrels per day more than the 15,941,000 barrels of oil per day they were using during the week ending April 8th….that was also up a bit from the 15,982,000 barrels of oil per day US refineries were using during the same week of 2015, even though the US refinery utilization rate only rose to 89.4%, up from 89.2% last week, which was still lower that the 91.2% refinery utilization rate of the same week last year….

with more oil being refined, our refinery production of gasoline rose by 170,000 barrels per day, averaging 9,738,000 barrels per day during the week ending April 15th, up from the average 9,568,000 barrels of gasoline per day produced during the week ending April 8th…oddly, though, that was still lower than the one week spurt to 9,763,000 barrels per day production we saw during the week ending April 17th of 2015, which set the record for gasoline output for any week in April…on the other hand, our refinery output of distillate fuels (diesel fuel and heat oil) fell by 72,000 barrels per day to 4,712,000 barrels per day during week ending the 15th, which was also 63,000 barrels per day, or 1.3% lower than our distillates production during the same week of 2015…    

even with the increased output of gasoline, our gasoline inventories fell for the second week in a row, slipping from 239,761,000 barrels on April 8th to 239,651,000 barrels on April 15th…however, this week’s gasoline supplies were still 6.2% higher than the 225,738,000 barrels of gasoline that we had stored on April 17th last year, which were at the time the highest for the third weekend in April since 1993…thus our gasoline stores are still categorized as “well above the upper limit of the average range” for this time of year…at the same time, our distillate fuel inventories also fell, as you might recall the cold snap that week, dropping by 3,554,000 barrels to end the week at 159,935,000 barrels, which oddly was widely reported as the impetus for a 3.8% jump in the price of crude oil…however, as we’ve pointed out all winter, distillate inventories also remained “well above the upper limit of the average range” for this time of year as of April 15th, still 23.7% greater than the 129,336,000 barrels of distillates we had stored as of April 17th last year..   

finally, largely on the 247,000 barrel per day increase in our imports, we had an additional 2,080,000 barrels of surplus oil supply this week, and hence our stocks of crude oil in storage, not counting what’s in the government’s Strategic Petroleum Reserve, rose once again to a new record of 538,611,000 barrels as of April 15th, up from the record 536,531,000 barrels of oil we had stored on April 8th…that was 10.4% higher than the then record of 489,002,000 barrels of oil we had stored as of April 17th, 2015, which at the time was the highest level of 2015, and 35.4% higher than the 397,659,000 barrels of oil we had stored on April 18th of 2014….we’ve now increased our inventories of crude oil by by nearly 56.3 million barrels since the beginning of this year, while setting new records for the amount oil we had in storage in the US in 9 out of the last 10 weeks… 

This Week’s Rig Count

and guess what else? for the 7th week in a row, we have another all-time record low for the number of active drilling rigs working in the USBaker Hughes reported that their total count of drilling rigs running in the US was down by another 9 rigs to 431 rigs as of April 22nd, which was also down from the 932 rigs that were working on April 24th of 2015, and down from the recent high of 1929 rigs that were deployed on November 21st of 2014… the count of rigs drilling for oil fell by 8 to a 6 year low of 343, which was down from 734 a year earlier, and down from the recent high of 1609 working oil rigs that we saw on October 10, 2014, while the count of drilling rigs targeting natural gas fell by 1 to a record low of 88, down from the 217 natural gas rigs that were drilling a year ago, and down from the recent natural gas rig high of 1,606 that was set on August 29th, 2008… 

two of the rigs that were shut down this week had been drilling in the Gulf of Mexico, reducing the Gulf rig count to 25 and the total offshore count to 26, with the other offshore platform working off the Cook Inlet in Alaska…that’s down from the 33 Gulf of Mexico platforms and 34 total offshore that were in use on April 24th of 2015…however, there was a new rig set up on an inland lake in southern Louisiana this week, which brings the inland waters rig count up to 4, up from the 3 rigs deployed drilling on inland waters last year at this time…

a net of 3 horizontal rigs were pulled out this week, leaving the count of rigs drilling horizontally at 332, which was down from the 720 horizontal rigs that were in use on April 24th of 2015, and down from the recent record of 1372 horizontal rigs that were drilling on November 21st of 2014…at the same time, 3 more directional rigs were also stacked, leaving 48 directional rigs still running, which was down from the 91 directional rigs that were in use at the end of the same week a year earlier…in addition, a net of 3 vertical rigs were also shut down, cutting the vertical rig count back to 51, which was down from the 121 vertical rigs that were in use nationally the same week last year… 

5 of the rigs that were shut down this week had been working the Permian basin of west Texas, which still has 136 rigs working there, down from the 246 rigs that were deployed in the Permian last year at this time, and down from the high of 568 rigs that were working the Permian on November 14, 2014….two rigs were also idled in the Eagle Ford of south Texas, which still has 40 rigs running, down from 115 a year ago and down from that basin’s peak of 259 rigs hit on May 25 of 2012…a rig also came out of the Cana Woodford of Oklahoma, which still has 29 rigs working it, down from 41 a year ago…and a single rig was also pulled from the Utica shale of Ohio, which has 11 working rigs remaining, down from the 26 rigs working the Utica a year ago at this time, and down from the Utica peak of 50 rigs last seen on December 26th of 2014….

with the reductions in the Permian and Eagle Ford, the state count tables thus indicated that Texas had the largest drilling rig decrease, as they saw a net of 7 rigs pulled out this week, leaving 187 rigs still working the state on April 22nd, which was down from the 393 rigs that were working in Texas on April 24rd last year…Louisiana, with the loss of 2 offshore rigs and the addition of a rig on an inland lake, was down by a net of 1 rig to 47 for the week, which was down from 74 rigs working there a year earlier…and lastly, Ohio also saw a single rig pulled out, leaving 11 still running in the state, which was down from the 25 rigs working Ohio last year at this time…

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March new home construction and existing home sales reports

there were just two widely watched reports released this week: the March report on New Residential Construction from the Census Bureau, and the March report on existing home sales from the National Association of Realtors (NAR)….this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for March, a weighted composite index of 85 different economic metrics, constructed such that a zero value indicates economic growth at the historical trend rate…the CFNAI fell from a downwardly revised –0.38 in February to –0.44 in March, which left the 3 month average of the index at –0.18 in March, indicating national economic activity has been slower than the historical trend during the 1st quarter….in addition, the Philadelphia Fed reported on its Manufacturing Outlook Survey for April, which covers most of Pennsylvania, southern New Jersey, and Delaware…the Philly Fed indicated its broadest diffusion index of current manufacturing conditions decreased from 12.4 in March to -1.6 in April, its seventh negative reading in 8 months, suggesting a return to contraction for the region’s manufacturing…

March Housing Starts Still Ahead of Last Year’s Pace; Permits Down 7.7%

the March report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started was at a seasonally adjusted annual rate of 1,089,000, which was 8.8 percent (±11.1%)* below the revised February estimated seasonally adjusted annual rate of 1,194,000 housing units started, but which was still 14.2 percent (±11.7%) above last March’s rate of 954,000 housing starts a year…the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, with the figure in parenthesis the most likely range of the change indicated; in other words, March housing starts could have been up by 2.3% or down by as much as 19.9% from those of February, with even larger revisions subsequently possible…in this report, the annual rate for February housing starts was revised from the 1,178,000 reported last month to 1,194,000, while January starts, which were first reported at a 1,099,000 annual rate, were revised from last month’s initial revised figure of 1,120,000 annually down to 1,117,000 annually with this report….

those annual rates of starts indicated by the headline count were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 88,700 housing units were started in March, actually up from the 82,700 units started in February…of those housing units started in March, an estimated 63,000 were single family homes and 24,800 were units in structures with more than 5 units, up from the revised 57,800 single family starts and 24,100 units started in structures with more than 5 units in February….the unadjusted estimates also show that housing starts increased in all regions of the country, although none by such a margin as to be within a 90% range of certainty…

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in March, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,086,000 housing units, which was 7.7 percent (±1.2%) below the revised February annual rate of 1,177,000 permits, but 4.6 percent (±0.9%) above the rate of permit issuance in March a year earlier…the annual rate for housing permits issued in February was revised from 1,167,000 to 1,177,000….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates, which showed permits for 98,500 housing units were issued in March, again actually up from the estimated 84.500 new permits issued in February…those March permits included 67,700 permits for single family homes, up from a revised 53,000 single family permits in February, and 27,800 permits for housing units in apartment buildings with 5 or more units, down from 29,100 such multifamily permits a month earlier… 

Existing Home Sales Rise 5.1% in March

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales rose 5.1% in March, projecting that 5.33 million homes would sell over an entire year if the March home sales pace were extrapolated over that year, which was also 1.5% greater than the annual sales rate projected in March of a year ago…that came after an annual sales rate of 5.07 homes in February, which was revised from the originally reported 5.08 million annual sales rate, and an annual home sales rate of 5.47 million in January…the NAR also reported that the median sales price for all existing-home types in March was $222,700, which was 5.7% higher than a year earlier, which they promote as “the 49th consecutive monthly year over year increase in home prices” although monthly price changes are quite volatile…the NAR press release, which is titled Existing-Home Sales Spring Ahead in March, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release…as sales of existing properties do not add to our national output, neither these sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month…this data indicates that roughly 420,000 homes sold in March, up by 33.8% from the 314,000 homes that sold in February and 3.7% more than the 405,000 homes that sold in March of last year, so we can see there was a large seasonal adjustment to correct for the typically large jump in spring home sales…that same pdf indicates that the median home selling price for all housing types rose 5.0% from a revised $212,100 in February to $222,700 in March, while the average home sales price was $265,200, up 3.9% from the $255,300 average in February, and up 3.5% from the $256,300 average home sales price of March a year ago, with the regional average home sales prices ranging from a low of $205,200 in the Midwest to a high of $355,400 in the West…for additional coverage with long term graphs on this report, see “Existing Home Sales increased in March to 5.33 million SAAR” and “A Few Comments on March Existing Home Sales” from Bill McBride at Calculated Risk…

 

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

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April 23rd graphics

natural gas by state:

April 16 2016 natural gas by state

rig count:

April 22 2016 rig counts

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while waiting for Doha, US oil supplies hit another record high, drilling hit another record low

oil markets, and most of those who write about them, were in a state of suspended animation most of this past week as they awaited results from the meeting of major global oil producers this weekend in Doha Qatar, where a freeze of oil production at current or at January levels is on the table…oil ministers and other officials of the members of OPEC, except for war-torn Libya and Iran, are participating, while non-OPEC oil producers Russia, Mexico, Azerbaijan, Oman, and Bahrain will also attend…several other large oil producers, including Canada, Norway and Brazil, won’t be involved, with Norway declining to participate and releasing their invitation just this week…rumors and news of such a get together of OPEC and non OPEC oil producers has been a major factor in driving the price of oil higher over the past two months, as oil prices have typically jumped on reported comments by one of the participants favorable to such a freeze, while prices have fallen when official comments suggesting that it wont work out are reported on…the well publicized secret meeting between Saudi oil minister Ali al-Naimi and Russian energy minister Alexander Novak in Qatar on February 16th that started this ball rolling came less than a week after oil prices bounced off a 13 year low near $26 a barrel back on February 11th…

the upcoming meeting continued to influence oil prices early this week as well, as the front month contract price for US oil rose from last week’s closing price of $39.58 a barrel to close Monday at $40.36 a barrel, then jumped nearly 5% to close at a 4 month high of $42.17 a barrel on Tuesday on headlines of a Russian-Saudi agreement for a “Production Freeze” …however, as the EIA report of a larger than expected inventory buildup reminded oil traders that the oil glut is still with us, oil prices fell back to close at $41.76 a barrel on Wednesday…that, plus uncertainly on the Doha outcome weighed on prices the rest of the week, as oil closed at $41.50 a barrel and then $40.36 a barrel on Friday, ending the week at the same price as Monday’s close…

writing this late Saturday afternoon, i had intended to speculate about what might happen at this Doha meeting, and what the possible outcomes and their effects might be…but i realized that since Doha is 7 hours ahead of us, what i write about it may already be moot by the time you read this…in fact, if you google “Doha OPEC” later this morning, you’ll probably learn more about the results and their expected impact that i could guess at before the fact…suffice it to say that a large part of the recent oil price rally is based on the thinking that an agreement to freeze production would be reached, and that any breakup of the Doha meeting that doesn’t at least put that forward will be bearish for prices…but on the other hand, since Russia, the Saudis, and most of the major producers save Iran are already producing flat out, an agreement to freeze at current levels won’t do much to alleviate the glut that those current levels of production have already produced..

The Latest Oil Reports from the EIA and a Look at our Declining Oil Output

in a reversal of last week’s oil patch activity, US refinery oil inputs dropped back to a more seasonal level this week while our oil imports returned to the same elevated level that we’ve seen all year, and hence the week again showed a large surplus of unused crude added to inventories, thus setting yet another record for US oil stores… Wednesday’s reports from the US Energy Information Administration showed that our imports of crude oil averaged 7,940,000 barrels per day during the week ending April 8th, up by 686,000 barrels per day from the average of 7,254,000 barrels per day we imported during the week ending April 1st…that was 11.1% more than the 7,148,000 barrels of oil per day we imported during the week ending April 10th a year ago, and the EIA’s weekly Petroleum Status Report (62 pp pdf) reports that the 4 week moving average of our oil imports was still at the 7.8 million barrel per day level, which was 4.1% above the same four-week period last year…  

at the same time, production of crude oil from US wells fell for the 11th time in the past 12 weeks, dropping by 31,000 barrels per day, from an average of 9,008,000 barrels per day during the week ending April 1st to an average of 8,977,000 barrels per day during the week ending April 8th, marking the first time our oil output has dropped below 9 million barrels per day since October 31st 2014…our oil production was hence down 4.3% from the 9,384,000 barrel per day level of the same week a year ago, and down 6.6% from the recent weekly record of 9,610,000 of oil production set in the week ending June 5th last year…we’re going to take a closer look at that recent oil production history, starting with a graph that comes from this week’s OilPrice Intelligence Report from oilprice.com

April 8th oil production

as marked, the above graph shows our oil production in thousands of barrels a day since the beginning of 2014 to the current weekly report (for the week ending April 8th)….but notice there are two parts to that graph; the first part, in blue, shows the confirmed monthly figures up to and including January of this year, the remainder, in yellow, shows the weekly estimates of production since the beginning of February…the weekly data, which we report on, are just estimates extrapolated from a small sampling of reports, whereas once all the data is in, the EIA logs it as a monthly report, again as barrels per day of production, which supersedes the previously published weekly data…the confirmed monthly data, which you can sort of glean from the graph, indicates that our oil production peaked at 9,694,000 barrels per day during April of last year, dipped to 9,315,000 barrels per day in June, and then gradually moved up to 9,452,000 barrels per day in September, before beginning the slide that continues to this day…

the reason we want to look at this today is a report from the International Energy Agency (IEA), a Paris based energy think tank set up by the rich oil consuming nations, that projects that global oil markets will “move close to balance” in the second half of the year as US shale production drops…now, most estimates over the past year have put the global oversupply of oil at between 2.1 million and 2.6 million barrels per day, and it strikes me as unrealistic to think that US production could drop by that much by the end of this year…looking at US oil prices over the past year, we see it wasn’t until August that oil prices fell below $50, and it wasn’t until November that prices started their dive to below $40, where they’ve been most of 2016, during which time shale well completions virtually halted…our confirmed December production averaged 9,235,000 barrels per day, while our unconfirmed production averaged 9,043,000 during March, a decrease of not even 2.1% over the three months that oil was priced below $40 a barrel and oil field activity was at a near standstill…at that rate of decrease, our oil production would still be at 8,485,000 barrels per day by next December, certainly not enough of a decrease, even from the peak, to reduce a global oversupply of more than 2 million barrels per day anytime this year…remember, fracked shale wells see their largest depletion during the first few months of operation, and output tails off only slowly for years thereafter…therefore, once new wells are no longer part of the mix, the depletion rate for US production will slow….yet the IEA says it’s the crash of US production, not a freeze from the Doha talks, that will lead to a rebalancing of global oil supply…

as we mentioned earlier, refinery processing of crude oil fell back by the most yet this year, after establishing early April highs last week…US refineries used 15,941,000 barrels of oil per day during the week ending April 8th, 492,000 barrels per day less than the average of 16,433,000 barrels per day they processed during the week ending April 1st, as the US refinery utilization rate fell to 89.2% of operable capacity last week, down from a 91.4% capacity utilization rate during the week ending the 1st…while the prior week’s oil processing was 3.1% ahead of the year earlier pace, this week we were processing 1.7% less than the 16,212,000 barrels per day that US refineries had used during the week ending April 10th 2015…

with less oil being refined, refinery production of gasoline fell to average 9,568,000 barrels per day during week ending April 8th, down from our gasoline output average of 9,617,000 barrels per day during week ending April 1st…that output of gasoline was still up more than 3.4% from the 9,249,000 barrels of gasoline per day that we produced during the same week last year, a time when gasoline output was unusually depressed….at the same time, our refineries’ output of distillate fuels (diesel fuel and heat oil) fell by 54,000 barrels per day to 4,784,000 barrels per day during week ending the 8th, which was also 211,000 barrels per day, or 4.2% lower than our distillates production during the same week of 2015…    

our lower production of gasoline, combined with a 101,000 barrel per day decrease in our imports of gasoline and an extraordinary 409,000 barrel per day increase in our demand for gasoline (see last metric) meant that gasoline had to be withdrawn from storage to meet that demand, and hence our gasoline inventories fell to 239,761,000 barrels by April 8th, down from the 243,998,000 barrels of gasoline we had stored as of April 1st…but this weeks stores were still 5.2% higher than the 227,873,000 barrels of gasoline that we had stored at the end of the same week last year, which were at the time the highest for the second weekend in April since 1993, and thus our gasoline stores are still well above the average range of their normal level for this time of year…at the same time, our distillate fuel inventories rose despite that lower production, increasing by 505,000 barrels to a total of 163,489,000 barrels as of April 8th…thus our stocks of distillates also remained well above the upper limit of the average range for this time of year, measuring 26.8% greater than the 128,941,000 barrels of distillates we had stored during the same week last year..   

finally, with the increase in imports and the slowdown in refining, we ended up with 6,634,000 more barrels of unused crude oil left over at the end of the week, and hence our stocks of crude oil in storage, not counting what’s in the government’s Strategic Petroleum Reserve, rose once again to a new record of 536,531,000 barrels as of April 8th, up from the 529,897,000 barrels of oil we had stored on April 1st…that was 10.9% higher than the then record of 483,687,000 barrels of oil we had stored as of April 10th, 2015, and 36.1% higher than the 394,135,000 barrels of oil we had stored on April 11th of 2014….we’ve now increased our inventories of crude oil by by nearly 54 million barrels over the last 13 weeks, setting new records for the amount oil we had in storage in the US in 8 of the last 9 of them… 

This Week’s Rig Count

for the sixth week in a row, we once again slowed to another all time low for drilling activity in the US, as Baker Hughes reported that their total count of active rigs drilling in the US fell by 3 rigs to 440 rigs as of April 15th, which was down from the 954 rigs that were deployed on April 17th of 2015, and down from the recent high of 1929 rigs that were working on November 21st of 2014… the count of rigs drilling for oil fell by 3 to 351, which was down from 734 a year earlier, and down from the recent high of 1609 working oil rigs that was set on October 10, 2014, while the count of drilling rigs targeting natural gas was unchanged at 89, off the record low by 1, down from the 217 natural gas rigs that were deployed a year ago, and down from the recent natural gas rig high of 1,606 that was set on August 29th, 2008…

three drilling rigs were started up in the Gulf of Mexico during the week, so the active Gulf platform count is now back up to 27, which is barely down from the 32 working in the Gulf and a total of 33 drilling offshore as of April 17th a year ago…at the same time, one of the rigs drilling through inland lakes in Louisiana was removed, so there are now 3 rigs remaining on inland waters, down from the 4 rigs that were set up on inland waters a year earlier… a net of 6 horizontal rigs were stacked this week, cutting the count of horizontal rigs down to 335, which was also down from the 741 horizontal rigs that were in use the same week last year, and down from the recent record of 1372 horizontal rigs that were drilling on November 21st of 2014…at the same time, a single directional rig was also stacked, leaving 51 directional rigs still running, which was down from the 91 directional rigs that were in use at the end of the same week a year earlier…meanwhile, a net of 4 vertical rigs were added, bringing the vertical rig count back up to 54, which was still down from the 122 vertical rigs that were in use on April 17th of last year… 

of the major shale basins, only the Cana Woodford of Oklahoma shut down as many as 2 rigs, as their active count fell to 30 rigs, down from 40 a year earlier…at the same time, the Arkoma Woodford of Oklahoma, the Eagle Ford of south Texas, the Marcellus of the northern Appalachians, the Mississippian of the southwest Kansas are, the Permian of west Texas and the Williston of North Dakota each saw one rig idled this week…those shutdowns left the Arkoma Woodford with 3 rigs, down from 6 a year earlier, left the Eagle Ford with 42 rigs, down from 123 a year earlier, left the Marcellus with 28 rigs, down from the 69 working there last year at this time, left the Mississippian with 4 rigs, down from 31 a year ago, left the Permian with 141 rigs, down from 258 rigs a year earlier, and left the Williston with 26 rigs, down from the 84 rigs working there a year earlier…meanwhile, only the Barnett shale of the Dallas area saw a single rig added; they now have 5 rigs actively drilling there, which is still down from the 6 rigs that were in use there a year ago…

the Baker Hughes state count tables indicate that Texas got rid of a net 3 rigs, still leaving 194 still drilling in the state as of April 15th, down from the 412 rigs that were deployed in Texas a year earlier…then Alabama, Alaska, North Dakota, Pennsylvania, and Wyoming each saw one rig removed…that left Alabama with 1 rig, down from 2 rigs on April 17th of 2015, left Alaska with 7 rigs, down from 12 a year earlier, left North Dakota, with 26 rigs, down from 83 a year earlier, left Pennsylvania with 16 rigs still drilling, down from 48 a year ago, and left Wyoming with 8 active rigs, down from the 23 rigs working the state a year earlier….at the same time, New Mexico added 2 rigs, bringing their count up to 19, which was still well down from the 49 rigs working New Mexico last year at this time…also, Kansas, Kentucky, Louisiana and Mississippi all saw a single additional rig set up…that brought Kansas up to 6 rigs, still down from 11 last year at this time, brought Kentucky up to 2 rigs, the same as they had deployed a year earlier, brought Louisiana up to 48 rigs, still down from last year’s 72, and brought Mississippi up to 2 rigs, down from 4 rigs a year earlier…

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March retail sales, consumer and producer prices, industrial production, and state jobs reports; February business inventories

major releases of this past week included Retail Sales for March and Business Sales and Inventories for February, both from the Census bureau, the March Industrial Production and Capacity Utilization report from the Fed, and the three major price indexes for March from the Bureau of Labor Statistics: the Consumer Price Index, the Producer Price Index, and the Import-Export Price Indexes, all of which are used by the BEA in computing the various deflators of the components of GDP…in addition, this week also saw the release of the Regional and State Employment and Unemployment report for March and the first regional Fed manufacturing index for April: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from +0.6 in March to +9.6 in April, its most expansionary reading in more than a year, indicating a return to growth for First District manufacturing…

March Retail Sales Down 0.3% After February Sales Revised Up 0.2%

seasonally adjusted retail sales fell 0.3% in March after retail sales for February were revised 0.2% higher….the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $446.9 billion for the month, which was a decrease of 0.3 percent (±0.5%)* from February’s revised sales of $447.9 billion but 2.8 percent (±0.8%) above the adjusted sales of March of last year…February’s seasonally adjusted sales were revised from the $447.3 billion originally reported to $448.243 billion, while January’s sales, which were revised down to $448.0 billion from the originally reported $449.9 billion last month, were revised higher from there, to $448,114 million with this report….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales rose 11.3%, from $412,328 million in February to $459,015 in March, while they were up 3.6% from the $442,876 million of sales in March a year ago, so we can see that there was a major seasonal adjustment to turn those headline March sales negative….

since you’re all familiar with the table from this report showing retail sales by business type that we’ve been including with this report for the past 3 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 2016 r” (revised) and the February 2015 to February 2016 percentage change as revised in the 2nd column of the pair…for your reference, our copy of this same table from last month’s advance February estimates, before this month’s revisions, is here…. lastly, 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 2016 retail sales table

from looking at this table, it’s clear that the 2.1% decrease to $97,658 million in seasonally adjusted sales at automobile and parts dealers was responsible for the headline March sales decrease; without that nominal drop in automotive sales, other retail sales increased by 0.2% to $354,434 million…on the other hand, 0.9% higher sales at gasoline stations were a boost to the aggregate, probably just due to higher gas prices, without which such sales we would have seen retail sales down 0.4%…meanwhile, the only retailers showing large increases in March sales were building material and garden supply stores, where sales rose 1.4% to $30,240 million, and drug stores, where sales were up 1.0% to $27,407 million…at the same time, sales at clothing stores fell 0.9% to $21,140 million, and sales at bars and restaurants fell 0.8% to $53,750 million..

Consumer Prices Up 0.1% in March, Reducing March PCE

consumer prices for energy and most services were higher in March, while prices for most foods groups and other goods were lower, resulting in an incremental increase in the CPI for the first time since November….the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.1% in March after falling by 0.2% in February and after they had been unchanged in January and fallen 0.1% in December…the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 237.111 in February to 238.132 in March, which left it statistically 0.85% higher than the 236.119 index reading of last March….regionally, prices for urban consumers have risen 1.5% in the West, 0.7% in the South, 0.5% in the Midwest, and 0.6% in the Northeast over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people, except for in the Midwest, where prices have been up 1.0% in nonmetropolitan cities of less than 50,000…with energy prices higher and food prices lower, seasonally adjusted core prices, which exclude food and energy, also rose by just 0.1% for the month, with the unadjusted core index rising from 245.680 to 246.358, which is now 2.2% ahead of its year ago reading of 241.067…

the seasonally adjusted energy price index rose by 0.9% in March after falling by 6.0% in January and by 2.8% in both December and January, and thus the energy index still remains 12.6% lower than it was in March a year ago….prices for energy commodities were 1.9% higher in March while the index for energy services saw a 0.2% increase, after increasing by 0.1% in February….the increase in the energy commodity index included a 2.2% increase in the price of gasoline, the largest component, and a 1.7% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, averaged a 1.8% decrease…within energy services, the index for utility gas service fell by 0.7%, leaving utility gas priced 9.2% lower than it was a year ago, while the electricity price index rose by 0.4%, after falling by 0.2% in February…energy commodities are still priced 21.2% below their year ago levels, with gasoline 20.9% lower priced than it was a year ago, which doesn’t even include the 18.7% one month drop in the gasoline index last January…meanwhile, the energy services price index is 3.3% lower than last March, as even electricity prices have fallen 1.7% over that period..

the seasonally adjusted food price index fell 0.2% in March, after it rose by 0.2% in February, as prices for food purchased for use at home fell 0.5% while prices for food away from home rose 0.2%, as average prices at fast food outlets rose 0.3% while average prices at full service restaurants rose 0.2%….for food at home, five of the six major grocery store food indexes were lower, with only the catch-all “other foods at home” showing a 0.4% increase on a 2.0% increase in butter prices, a 1.5% increase in prices for sauces and gravies and a 1.4% increase in prices for soups…a 1.9% drop in prices for fruits and vegetables led the price decrease in foods at home, as fresh vegetable prices fell 3.2% on a 7.2% drop in the price of tomatoes, and prices for fresh fruits other than apples, bananas and citrus were 1.7% lower…meanwhile, the price index for cereals and bakery products was down 0.6% as prices for flour and prepared flour mixes fell 1.9% and prices for breakfast cereal prices were 1.0% lower….at the same time, the price index for the meats, poultry, fish, and eggs group fell by 0.5% as prices for eggs were 5.2% lower and poultry prices were 0.8% lower, more than offsetting a 0.7% increase in the price index for beef and veal…the index for dairy products was also 0.5% lower, as milk prices fell 1.3% and cheese prices fell 0.4% while ice cream prices rose 1.1%…lastly, the index for beverages and beverage materials was 0.3% lower as prices for roast coffee fell 1.7% and tea prices fell 1.2%, more than offsetting a 0.1% increase in prices for carbonated drinks…only two food line items have seen price changes greater than 10% over the past year; ham prices, which were down 0.9% in March, are 10.4% lower than they were in March a year ago, while apple prices are now 11% higher than last year, after rising 1.6% this month….the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall

among the seasonally adjusted core components of the CPI, which rose by 0.1 in March after rising 0.3% in both February and January, the composite of all commodities less food and energy commodities fell by 0.2% while the composite for all services less energy services was 0.2% higher….among the commodity components, which will be used by the Bureau of Economic Analysis to adjust March retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.2% on a 1.7% decrease in prices for appliances other than major appliances and a 1.8% decrease in prices for furniture not including bedroom, living room and kitchen furniture…apparel prices were 1.1% lower on a 7.9% decrease in prices for men’s pants and shorts, a 3.0% decrease in prices for men’s suits, sport coats, and outerwear, a 2.2% decrease in prices for infants’ and toddlers’ apparel, and a 3.7% decrease in prices for watches and jewelry, which were only partially offset by a 1.0% increase in prices for women’s suits and separates…at the same time, prices for transportation commodities other than fuel were down 0.1%, as prices for new cars were down 0.2% while prices for tires fell 0.4%….on the other hand, prices for medical care commodities were 0.3% higher on 0.5% higher prescription drug prices, while the recreational commodities index was 0.3% lower as prices for TVs fell 2.4% and prices for recreational books were 4.9% lower…likewise, the education and communication commodities index was 0.5% lower on a 2.0% decrease in prices for computer software and accessories and a 0.7% decrease in prices for telephone hardware, calculators, and other consumer information items, while lastly the separate index for alcoholic beverages was unchanged despite an 0.8% drop in prices for wine at home, and the index for other goods rose 0.2% on a 0.5% increase in cigarette prices…

within services, the price index for shelter rose 0.2% on a 0.2% increase in rents and a 0.2% increase in owner’s equivalent while costs for lodging away from home at hotels and motels fell 2.1%, and costs for water and sewerage maintenance were 0.5% higher….medical care services rose 0.1% as glasses and eye care services rose 0.4% while dental services fell 0.3%…at the same time, the transportation services index rose 0.2% on a 2.2% increase in car and truck rentals and a 1.6% increase in ship fares, while airline fares were 0.9% lower….meanwhile, the recreation services index rose 0.5% for the 2nd month in a row as admissions to movies, theaters, and concerts rose 2.3% and club dues and fees for participant sports and group exercises rose 0.9%… in addition, education and communication services were 0.1% higher on a 0.5% increase in delivery services and 0.3% higher elementary and high school tuition and fees……lastly, other personal services were up 0.2% on a 1.3% increase in the financial services index…among core prices, the 12.4% increase in moving and storage expenses was the only line item with a year over year increase greater than 10%, while only telephones, which were priced 14.3% lower, and televisions, which are now 16.6% cheaper, saw their prices drop by more than 10% over the past year…

with this release, we can now attempt to estimate the economic impact of the retail sales report we covered earlier…for the most accurate estimate, and the way the BEA will be figuring 1st quarter GDP at the end of April, we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales; for instance, March’s clothing store sales, which fell by 0.9% in dollars, should be adjusted with the price index for apparel, which indicated prices were down by 1.1%, to show us that real retail sales of clothing were actually up 0.2% in March…then, to get a GDP relevant quarterly change, we’d have to compare such adjusted real clothing sales for the 3 months of the first quarter, January, February and March, with real clothing consumption for the months of October, November and December, and then repeat that process for each other type of retailer, obviously quite a tedious task to undertake manually….the short cut we usually take to get a ballpark estimate of real sales is to apply the composite price index of all commodities less food and energy commodities, which was down 0.2%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of the aggregate sales…those sales were down just about 0.25% in March, while their price index was down 0.3%, leaving real retail sales excluding food and energy sales still down by about 0.05%…then, for the rest of the retail aggregate, we find sales at grocery stores were unchanged in March, while prices for food at home were down  0.5%, suggesting a real increase of around 0.5% in the quantity of food purchased for the month…next, sales at bars and restaurants were down 0.8% in dollars, and moreover those dollars bought 0.2% less, so real sales at bars and restaurants were down about 1.0%…and while gas station sales were up 0.9%, gasoline prices were up 2.2%, suggesting a real decrease in the amount of gasoline sold, with the caveat that gas stations sell more than gasoline, and we don’t have the details on that…weighing the food and energy components at roughly 30% of total retail sales, we can estimate that real retail sales in March were down slightly more than 0.1% from February…then looking at Tables 8 and 9 in the personal income and outlays report, we can see that real personal consumption expenditures of goods were at a 3,909.2 billion annual rate in February, already lower than the $3,917.9 billion annual rate of real personal consumption expenditures of goods in the 4th quarter…in very round numbers that would suggest March real personal consumption expenditures of goods, 0.1% lower than February’s, would reduce 1st quarter GDP by roughly 0.08 percentage points…

Wholesale Prices 0.2% Higher in March, Margins of Service Providers 0.2% Lower

the seasonally adjusted Producer Price Index (PPI) for final demand decreased by 0.1% in March as prices for finished wholesale goods rose by 0.2%, while margins of final services providers fell by the same amount…this followed a February report that showed the overall PPI had decreased 0.2%, with prices for finished goods down 0.6% while final demand for services was unchanged….producer prices thus remain 0.1% lower than a year ago, and 1.0% lower than two years ago, as the producer price index was down 0.9% over the span from March 2014 to March 2015, following the large crash of oil prices at the beginning of last year…

as we noted, the index for final demand for goods, aka ‘finished goods’, was up 0.2% in March after falling by 0.6% in February and by 0.7% in both January and in December, as the index for wholesale energy prices rose 1.8% on a 10.5% increase in wholesale prices for home heating oil and a 16.0% increase in wholesale prices for LP gas, which were partially offset by a 1.5% drop in gasoline prices….at the same time, the price index for wholesale foods was 0.9% lower on a 27.4% drop in wholesale prices of eggs for fresh use, reversing February’s 28.9% egg price hike, and a 12.0% drop in wholesale price index for fresh and dried vegetables that followed a 19.0% drop the month before….excluding food and energy, the index for final demand for core wholesale goods rose by 0.1% in March, as a 1.5% drop in wholesale prices for industrial chemicals and a 1.1% decrease in prices for household appliances were offset by a 1.3% increase in wholesale prices for sporting and athletic goods and a 2.9% increase in wholesale prices for jewelry, platinum and karat gold..

meanwhile, the index for final demand for services fell 0.2% in March after being unchanged in February and rising by 0.5% in January, as the index for final demand for trade services fell 0.5%, the index for final demand for transportation and warehousing services fell 0.3%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.1% lower….noteworthy among trade services, seasonally adjusted margins for chemical wholesales were 6.9% lower and margins for fuels and lubricants retailers were 4.9% lower, while margins for book retailers were 2.5% higher…among transportation and warehousing services, margins for truck transportation of freight fell 0.7% and margins for rail transportation of freight fell 0.5% while margins for air transportation of freight were 1.3% higher…in the core final demand services index, margins for passenger car rentals fell 6.0% and margins for consumer loans were 2.2% lower..

this report also showed the price index for processed goods for intermediate demand fell by 0.2% after a 0.7% decrease in February, as intermediate processed goods prices have now been down 18 out of the last 20 months and remain 5.5% lower than in March a year ago…. the price index for processed foods and feeds fell 0.6%, while prices for intermediate energy goods were unchanged and the price index for processed goods for intermediate demand less food and energy was 0.1% lower…meanwhile, the price index for intermediate unprocessed goods was up 2.5% after falling 2.1% in February, in its first increase since June of last year…driving that increase was a 6.1% jump in the index for crude energy goods, while the index for unprocessed foodstuffs and feedstuffs was down 0.1%, and producer prices for raw materials other than food and energy materials was up 2.1% in only its second increase in nine months… this raw materials index remains 14.1% lower than it was a year ago, as most commodity prices remain depressed…

lastly, the price index for services for intermediate demand was 0.3% lower in March after it rose 0.3% in February, on a 1.1% decrease in the index for trade services for intermediate demand and a 0.2% decrease in the index for transportation and warehousing services for intermediate demand, while the core price index for services less trade, transportation, and warehousing for intermediate demand was unchanged…a 6.9% decrease in margins for intermediate chemicals and allied products wholesaling and a 2.4% drop in margins for intermediate business loans outweighed 1.3% higher margins for intermediate staffing services…over the 12 months ended in March, the year over year price index for services for intermediate demand, which has never turned negative, remains 1.4% higher than it was a year ago…   

Industrial Production Down 0.6% from February’s Revised Level

two weeks before this week’s release of the March report on Industrial production and Capacity Utilization, the Fed released the results of its annual benchmark revisions to the Industrial Production and Utilization data for the period covering January 1986 through February 2016, incorporating newly available annual data on output and prices…hence, this revision also changed the benchmark for all of the indexes, which had previously been set with 2012’s level of activity equal to 100.0, and that means all of the previously published and reported on indexes now have a new benchmark, or basis…the net of all these revisions is that industrial production growth has been slower than previously reported, as it’s now seen that total industrial production increased by an average of about 2 1/2 percent from 2011 through 2014 before falling roughly 1 1/2 percent in 2015…that also means that industrial production did not return to its pre-recession high until November 2014, six months later than previously estimated….below we’re including a graphic of the revised index from Doug Short’s coverage of this revision
April 2016 industrial production revisions

what’s shown on the graph above is pretty obvious; industrial production figures as we’ve been reporting on them over the past year are shown in pink; the new industrial production index values, as of the benchmark revision, are shown in blue..as Doug’s callout notes, the February’s reported industrial production index had been down 1.47% from the previously published high in December 2014; it’s now 2.34% below the level of November 2014, which now marks the new high….this current March release reports & in some cases revises all the new figures as if the old data had never been reported previously…

thus, starting from these newly published figures of two weeks ago, the March release on Industrial production indicated that industrial production fell by 0.6% for the second month in a row, after it had risen by 0.5% in January, which was revised from the 0.6% increase for January shown in the benchmark revision and the 0.8% increase for January published a month ago…February’s 0.6% decrease was revised from the 0.5% decrease shown in both the benchmark revision and last month’s report…the industrial production index, with the benchmark set for the revised average 2012 production to equal to 100.0, fell to 103.4 in March from in February, which was originally reported at 106.3 with last month’s report…at the same time, the January index was revised from the revised reading of 104.7 to 104.6, and hence the industrial production index is now 2.0% lower than a year ago….to the extent that this report plays into GDP, the average index reading of 104.0 for the months of January, February and March is more than half a percent below the 104.6 index average for October, November and December, suggesting a noticeable negative impact on the 1st quarter GDP components that this index influences…

the manufacturing index, which accounts for more than 75% of the total IP index, fell by 0.3, from 103.4 in February to 103.1 in March, after the index for February was revised down from 103.6 to 103.4…that left the manufacturing index just 0.4% higher than a year earlier, largely because of the considerable downward revision in the annual revision…. meanwhile, the mining index, which includes oil and gas well drilling, fell to 103.9 in March from 107.0 in February, which was originally published as 108.1…the mining index has now been down 7 months in a row and is 12.9% lower than it was a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 1.2% from the already depressed level of February, dropping from 97.5 in February to 96.4 in March…with the utility index already depressed by a warmer than normal winter, it’s now 7.7% below the level of last March, when demand for heating was closer to normal…

this report also gives us capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which were also extensively revised with the benchmark revision….after the revisions, seasonally adjusted capacity utilization for total industry fell from 75.3% in February to 74.8% in March; the previously published capacity utilization figure for February was 76.7%..capacity utilization for all manufacturing industries fell from 75.4% in February to 75.1% in March; utilization of NAICS durable goods production facilities fell from 76.0% in February to 75.5% in March, while capacity utilization for non-durables fell from 75.4% in February to 75.3% in March….capacity utilization for the mining sector fell to 73.7% in March from 75.6% in February, which was originally published as 77.5%, while utilities were also operating at 73.7% of capacity during March, down from the revised 74.6% of capacity during February…for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories….  

February Business Inventories Down 0.1%; Real Growth Still at a Pace Greater than 4th Quarter

following the release of the retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for February (pdf), which incorporates the revised February retail data and previously published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month…according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,284.4 billion in February, down 0.4 percent (±0.2%) from January’s revised sales, and down 1.4 percent (±0.4%) from February sales of a year earlier…note that total January sales were also revised down by more than 0.5%, from $1,296.2  billion to $1,289.5 billion….manufacturer’s sales fell by 0.7% from January to $462,807 million in February, while retail trade sales, which exclude restaurant & bar sales from the revised February retail sales we reported earlier, fell 0.2% to $394,050 million, and wholesale sales fell 0.2% to $427,560 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,812.1 billion at the end of February, down 0.1 percent (±0.1%)* from January, but 1.2 percent (±0.5%) higher than in February a year earlier…the value of end of January inventories was revised up by less than 0.1%, from the $1,812.3 billion reported last month to $1,813,781 million with this report…seasonally adjusted inventories of manufacturers were estimated to be valued at $634,282 million, 0.4% lower than in January, inventories of retailers were valued at $594,470 million, 0.6% greater than January, while inventories of wholesalers were estimated to be valued at $583,346 million at the end of February, down 0.5% from January…

before the change to inventories are included in GDP data, they must first be adjusted any changes in price to determine the real change in inventories…all the price changes used to adjust inventories come from the various components of the producer price index, even those of retail, which are valued as finished goods…last week we looked at both factory inventories and wholesale inventories, in light of 0.7% lower finished goods prices for January, 0.6% lower finished goods prices for February, 1.2% lower intermediate goods prices for January, and 0.7% lower finished goods prices for February, and judged that real inventories for both were up, with wholesale inventories possibly adding incrementally to 1st quarter GDP….the value of retail inventories, up 0.4% in January and 0.6% in February, would be adjusted with finished goods for those months, suggesting a 1.1% real increase in January retail inventories, followed by a 1.2% increase in real February inventories…that follows nominal inventory increases of 0.1%, 0.2%, and 0.2% for October, November, and December respectively, which would have been adjusted with finished goods producer price index decreases of 0.3%, 0.1% and 0.6% for those same months, resulting in real retail inventory growth at 0.4%, 0.3%, and 0.8% for those months of the 4th quarter…that suggests real inventories have been growing at a faster pace through January and February than they were in the 4th quarter, which would thus a;so boost 1st quarter GDP…that insight comes with the caveat that the Atlanta Fed’s GDPNow model still projects that inventories will subtract 0.65 percentage points from 1st quarter GDP…

State and Regional Employment Report for March

the Regional and State Employment and Unemployment Summary for March expands on the national employment situation summary of two weeks ago by breaking down the state and regional details…as with most BLS reports, the press release is very readable & self explanatory, with BLS referring to appropriate tables linked to at the bottom of the press release wherever relevant, where there are tables covering data for all 50 states…the BLS table corresponding to household survey data, includingthe seasonally adjusted count of the unemployed and the unemployment rate for each state, is here….South Dakota at 2.5% and New Hampshire at 2.6% had the lowest unemployment rates in March, while Alaska had the highest unemployment rate at 6.6%, followed by West Virginia with a 6.5% jobless rate..

for a breakdown of payroll employment by job type for each state over the past 3 months, and the change in employment for each since last March, see the following two BLS tables accompanying this release: Table 5. Employees on nonfarm payrolls by state and selected industry sector, seasonally adjusted and Table 6. Employees on nonfarm payrolls by state and selected industry sector, not seasonally adjusted …the latter two tables are very detailed, giving you both actual and seasonally adjusted totals for jobs in each state and the District of Columbia in several categories, including construction, manufacturing, trade, transportation and utilities, financial, professional and business services, education and health services, leisure and hospitality and government….the 22 page pdf version of this report has even more details also includes map graphics for both the employment rate and the year over year payroll jobs increase by state and region…

(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 16th graphics

US oil production

April 8th oil production

March retail sales:

March 2016 retail sales table

industrial production benchmark revision:

April 2016 industrial production revisions

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