The major economic releases of last week were the 3rd estimate of 2nd quarter GDP from the Bureau of Economic Analysis, which included an annual revision covering the prior five years, and the August report on Personal Income and Spending, also from the BEA, which includes two months of data on personal consumption expenditures and hence will account for more than 47% of 3rd quarter GDP, the Employment Situation Summary for September and the Job Openings and Labor Turnover Survey (JOLTS) for August, both from the Bureau of Labor Statistics, and the August report on Construction Spending (pdf) and the Full Report on Manufacturers’ Shipments, Inventories and Orders for August, both from the Census Bureau…in addition, this week also saw the last regional Fed manufacturing survey for September: the Dallas Fed Texas Manufacturing Outlook Survey, which covers Texas and adjacent western Louisiana and southeastern New Mexico, reported its general business activity edged down to +9.8 in September from +11.6 in August, indicating a smaller plurality of Texas businesses are experiencing improving metrics than in the prior month..
The week’s major privately issued reports included the ADP Employment Report for September, wherein the private payroll processor reported a 90,000 increase in private jobs in September; the September report on light vehicle sales from Omida, aka Wards Automotive, (the source of the BEA’s data) which estimated that vehicles sold at a 16.39 million annual rate in September, down from the 16.80 million annual rate in August, and down from the 16.72 million annual sales rate in September of last year, the Case-Shiller house price indexes for July from S&P Case-Shiller, who reported that their national home price index based on relative May, June and July home sales prices was 1.9% higher than their price index for the same three months of a year earlier, and the September Manufacturing Report On Business from the Institute for Supply Management, which reported that the manufacturing PMI (Purchasing Managers Index) slipped to 54.5% in September from 54.6% in August, indicating that a slightly smaller plurality of manufacturing purchasing managers continued to report improving metrics for the key facets of their business in September….
Employers Added 29,000 Jobs in September; Unemployment Rate, Employment Rate, and Participation Rate All Rose
The Employment Situation Summary for September reported a much smaller increase in payroll jobs than what had been expected, but that the employment rate and the labor force participation rose, and that the unemployment rate rose largely on upward rounding…estimates extrapolated from the establishment survey data projected that employers added a seasonally adjusted 29,000 jobs in September, after the previously estimated payroll job change for July was revised down from last month’s revised increase of 21,000 jobs to a decrease of 10,000, while the payroll jobs increase for August was revised from 162,000 down to 133,000, revisions which mean that this report thus shows 31,000 fewer payroll jobs than last month’s, in contrast to the 84,000 job increase forecast by the financial media….the unadjusted data, meanwhile, shows that there were actually 333,000 more payroll jobs in September, largely due to job increases relating to the beginning of the school year, and that the seasonal adjustment brought the headline jobs number down to a level where that normal September job increase was negated…
Seasonally adjusted job increases were spread through the goods producing and the service sectors, while modest job losses were seen in government, information, and financial activities…since the BLS summary of the job gains by sector is clear and as detailed as our usual synopsis, we’ll just quote from that summary here:
- Total nonfarm payroll employment changed little in September (+29,000), following an average monthly gain of 45,000 over the prior 12 months. Employment in all major industries changed little over the month. (See table B-1.)
- Health care employment continued its upward trend in September (+17,000), but at a slower pace than the average monthly gain over the prior 12 months (+33,000). In September, employment continued to trend up in ambulatory health care services (+13,000) and in hospitals (+12,000), while nursing and residential care facilities lost jobs (-9,000).
- Employment in construction changed little in September (+11,000). The industry had added an average of 10,000 jobs per month over the prior 12 months. In September, employment in nonresidential specialty trade contractors continued to trend up (+12,000).
- Manufacturing employment was little changed in September (+9,000) but is up by 72,000 since a recent low in December 2025. Over the month, employment increased in plastics and rubber products manufacturing (+5,000) and in machinery manufacturing (+5,000).
- In September, financial activities employment was little changed (-7,000). Employment in financial activities is down by 129,000 since a recent peak in May 2025, with most of the job loss in insurance carriers and related activities (-90,000).
- Employment also showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; wholesale trade; retail trade; transportation and warehousing; information; professional and business services; social assistance; leisure and hospitality; other services; and government..
The establishment survey also showed that average hourly pay for all employees rose by 5 cents an hour to $37.81 an hour, after it had increased by a revised 11 cents an hour in August; at the same time, the average hourly earnings of production and nonsupervisory employees increased by 7 cents to $32.60 an hour….employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in September, while hours for production and non-supervisory personnel was unchanged at 33.8 hours…at the same time, the manufacturing workweek was unchanged at 40.6 hours, while average factory overtime was unchanged at 3.0 hours…
Meanwhile, the seasonally adjusted extrapolation from the September household survey indicated that the number of those who would self-report being employed rose by an estimated 406,000 to 163,152,000, while the similarly estimated number of those who would qualify as being unemployed and looking for work rose by 78,000 to 7,109,000; and hence the civilian labor force increased by a rounded 485,000…since the working age population had grown by 139,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by a rounded net of 346,000 to 105,292,000….the increase in the total labor force was enough to raise the labor force participation rate, from 61.6% in August to 61.8 in September, even as it was still down from 62.5% in September of last year…at the same time, the relatively larger increase in number employed was enough to boost the employment to population ratio, which we could think of as an employment rate, from 59.1% in August to 59.2% in September…meanwhile, with the modest increase in the number unemployed, the unemployment rate rose to 4.2% from 4.1%, which was a function or rounding more than anything, since the actual increase was from 4.14% to 4.17%….meanwhile, the number of the employed who reported they were forced to accept just part time work rose by 111,000 to 4,501,000 in September, but even so, the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, fell from 7.7% in August to 7.6% in September, the lowest U6 unemployment rate since January 2025, largely due to a decrease in discouraged workers and a 236,000 drop in “marginally attached” workers….
Like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there…note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it alongside of the press release to avoid the need to scroll up and down the page..
Third Estimate of 2nd Quarter GDP & Revisions From 2021 to Present
The Third Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis released on Thursday included an annual revision, which in this year’s case revised GDP data from the first quarter of 2021 through the first quarter of 2026, resulting in revisions to GDP, GDP by industry, gross domestic income, and related components…the updated estimates show that real GDP increased at an average annual rate of 3.4 percent over the five year period from 2020 to 2025, an upward revision from the 3.3% growth rate for that period that was previously published…for 2021, the change in real GDP was revised from 6.2 percent to 6.3 percent, reflecting a downward revision to imports (which are a subtraction in the calculation of GDP) and upward revisions to state and local government spending and to consumer spending….for 2022, the change in real GDP was revised down from 2.5 percent to 2.4 percent, reflecting downward revisions to consumer spending and to state and local government spending…meanwhile, the change in real GDP for 2023 was unrevised at 2.9 percent, as upward revisions to state and local government spending and to nonresidential fixed investment were offset by downward revisions to consumer spending on services and to private inventory investment….for 2024, the change in real GDP was revised from 2.8 percent to 3.0 percent, primarily reflecting upward revisions to nonresidential fixed investment and state and local government spending…lastly, for 2025, the change in real GDP was revised from 2.1 percent to 2.3 percent, reflecting upward revisions to nonresidential fixed investment in structures and state and local government spending, which were partly offset by an upward revision to imports…
The growth rate of the first quarter of 2026, which had last been reported at 2.1% when we reviewed the 3rd estimate of 1st quarter GDP three months ago, was revised to a 2.5% growth rate after this revision, as upward revisions to consumer consumption of goods and services and to exports more than offset downward revisions to fixed private investment, to inventories, and to government…More importantly, the price index for gross domestic purchases for the first quarter of 2026 was revised from 3.6% to 3.2%, reflecting a change in the methodology used to compute inflation, which thus underpinned the rounded 0.4 percentage point upward revision to real 1st quarter growth, suggesting there was little change in the nominal GDP components before the inflation adjustment was applied…checking that, we find that the current dollar GDP growth rate for the first quarter was actually statistically unchanged at 5.76%..
Revisions like those to the GDP readings of the past five years, and to the 3rd estimate of 1st quarter GDP, published as “final” just three months ago, should caution you to take even this 3rd estimate of 2nd quarter growth, which was released on Wednesday, with a grain of salt…the Third Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.2% annual rate in the 2nd quarter, revised from the 1.5% growth rate that was reported in the second estimate last month, as growth of personal consumption expenditures for both goods and services, fixed private investment, inventories, net exports, the federal government, and state and local government were all upwardly revised….In current dollars, our second quarter GDP grew at a 8.49% annual rate, increasing from a revised $31,906.3 billion annual rate in the 1st quarter to a $32,563.0 billion annual rate in the 2nd quarter, with the headline 2.2% annualized rate of increase in real output arrived at after annualized GDP inflation adjustments averaging 6.1% were computed from the price changes of the GDP components and applied to their current dollar change…that so-called “GDP deflator” was revised down from the 6.4% reported a month ago, which thus accounted for 0.3% of the upward revision to GDP…
As we review this month’s revisions to the 2nd quarter data, remember that this press release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change that’s compounded by 4 times from the change that actually occurred from one 3 month period to the next, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes now chained from 2017, and then that all percentage changes in this report are calculated from those 2017 dollar figures, which are then used as quantity indexes, rather than as any reality based dollar amounts….for our purposes, all the data that we’ll use in reporting the changes here comes directly from here comes directly from National Income and Product Accounts Data Tables.…specifically, we’ll be referencing Table 1.1.5. Gross Domestic Product, which shows the quarterly current dollar values for each of the major GDP components since the first quarter of 2024, Table 1.1.7. Percent Change From Preceding Period in Prices for Gross Domestic Product, which shows the change in the price indexes for each of the major GDP components over the same period; Table 1.5.2. Contributions to Percent Change in Real Gross Domestic Product, Expanded Detail, which shows the contribution of each of the components to the GDP change for those quarters; and Table 1.5.6. Real Gross Domestic Product, Expanded Detail, Chained Dollars, which shows the inflation adjusted value of each of the GDP components…
Growth of real personal consumption expenditures (PCE), used to compute the largest component of GDP, was revised from the 3.4% growth rate reported last month to a growth rate of 3.8% in this 3rd estimate…that growth rate figure was arrived at by deflating the 8.97% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated dollar weighted consumer inflation grew at a 5.0% annual rate in the 2nd quarter, which was revised from the 5.3% PCE inflation rate reported a month ago…..real (inflation adjusted) consumption of durable goods grew at a 7.4% annual rate, revised from the 5.7% growth rate reported in the 2nd estimate, and added 0.52 percentage points to GDP, as real consumption of motor vehicles and parts grew at an 11.3% rate and accounted for half of the growth in durable goods….at the same time, real consumption of nondurable goods by individuals grew at a 3.1% annual rate, revised from the 3.5% increase reported in the 2nd estimate, and added 0.41 percentage points to the 2nd quarter’s economic growth, as growth in consumption of food, clothing and footwear, and ‘other’ non-durables offset a modest decrease in real consumption of gasoline……meanwhile, real consumption of services grew at a 3.4% annual rate, revised from the 3.1% growth rate reported last month, and added 1.57 percentage points to the final GDP tally, as a 7.0% growth rate in real consumption of health care accounted for more than 50% of the growth in services…
Meanwhile, seasonally adjusted real gross private domestic investment grew at a 4.6% annual rate in the 2nd quarter, revised from the 2.7% growth estimate reported last month, as real private fixed investment grew at a 7.7% rate, revised up from the 7.0% growth rate reported in the second estimate, while the shrinkage of real inventories was somewhat smaller than previously estimated….the change in real investment in non-residential structures was revised from shrinking at a 1.8% rate to growing at an 0.1% rate, while real investment in equipment grew at a 13.4% rate, revised from the 13.6% growth rate previously reported…at the same time, the quarter’s investment in intellectual property products was revised from growth at a 8.8% rate to growth at a 9.2% rate, while the growth rate of residential investment was revised from 1.3% to 2.8% annually….after those revisions, the increase in investment in non-residential structures added 0.00 percentage points to the 2nd quarter’s growth rate, the increase in investment in equipment added 0.74 percentage points to the quarter’s growth, the increase in investment in intellectual property added 0.51 percentage points, while the increase in investment in residential structures added 0.10 percentage points to the 2nd quarter’s GDP growth…
At the same time, the second quarter’s change in real private inventories was revised from the previously reported $91.1 billion decrease in inflation adjusted dollars to indicate inventories shrunk at an inflation adjusted $63.4 billion rate…that came after inventories had shrunk at an inflation adjusted $31.9 billion in the 1st quarter, revised from the $28.1 billion 1st quarter inventory contraction previously reported, and hence the $31.5 billion negative change in real inventory growth from that of the 1st quarter subtracted 0.53 percentage points from the 2nd quarter’s growth rate, revised from the 0.72 percentage point subtraction shown in the second estimate, when the quarterly change in real inventory growth was shown at -$63.0 billion….however, since growth in inventories would indicate that more of the goods produced during the quarter would have been left in storage or “sitting on the shelf”, the $31.5 billion decrease in their growth conversely means real final sales of GDP were greater by that amount, and therefore the BEA found that real final sales of GDP grew at a 2.75% rate in the 2nd quarter, revised from the 2.2% rate of increase in real final sales originally shown in the second estimate…
The previously reported increase in real exports was somewhat greater after this estimate, while the previously reported increase in real imports was revised higher by less at the same time, and as a result, the negative impact of our imbalanced foreign trade on GDP was a bit smaller than in the second estimate….our real exports grew at a 5.0% rate, revised from the 4.5% growth rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country and hence not included in other GDP components, that export growth added 0.56 percentage points to 2nd quarter GDP, revised from the addition of 0.50 percentage points shown in the second estimate….meanwhile, the previously reported 12.5% increase in our real imports was revised to a 12.6% increase , and since imports subtract from GDP because they represent either consumption or investment added to another GDP component that shouldn’t have been because was not produced here, that import increase subtracted 1.66 percentage points from the 2nd quarter’s growth rate, revised from the 1.64 percentage point subtraction due t0 imports shown in the second estimate…..thus our deteriorating trade balance subtracted a net 1.10 percentage points from 2nd quarter GDP, revised from the rounded 1.14 percentage point subtraction that had been indicated in the second estimate…
Finally, there were also revisions to real government consumption and investment in this 3rd estimate, up for both the Federal government and for state and local government, as the entire government sector shrunk at an 0.1% rate, revised from the 1.0% contraction rate previously reported…real federal government consumption and investment was seen to have shrunk at a 2.4% annual rate, revised from the 4.2% contraction rate shown in the 2nd estimate, as real federal outlays for defense were revised to show growth at a 5.3% rate, revised from the 2.4% growth rate previously reported, and added 0.19 percentage points to 2nd quarter GDP, while all other federal consumption and investment shrunk at a 12.7% rate, revised from the 13.2% contraction rate previously reported, and subtracted 0.34 percentage points from 2nd quarter GDP….meanwhile, real state and local consumption and investment grew at a 1.2% rate over the quarter, which was revised from the 0.9% growth rate reported in the 2nd estimate, and added 0.13 percentage points to 2nd quarter GDP growth, as state and local investment shrunk at a 0.9% rate and subtracted 0.02 percentage points from the 0.15 addition from state and local consumption expenditures…note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, thus indicating there was an increase in the output of those goods or services…
August Personal Income up 0.2%, Spending Up 0.9%; PCE Prices Up 0.3%; Savings Rate at a 44 Month Low; Two Months PCE Would Add 199 Basis Points to Q3 GDP
Like the GDP report, the Income and Outlays report for August also went through an annual revision, with its revisions also from the first quarter of 2021 through the first quarter of 2026 for all of the metrics it reports, including personal consumption expenditures (PCE), the personal income and disposable personal income data, our savings and savings rate, and the PCE price index, the inflation gauge the Fed targets….A summary of those revisions and comparisons to previously published data is provided by an Information on 2026 Annual Updates page that accompanies this month’s report...since all the revisions made to personal consumption expenditures had already been incorporated into the GDP revisions that we have just reviewed, at this time we’ll only consider those revisions from recent months that are relevant to putting the August and potential 3rd quarter changes in perspective…
Also like the GDP report, all the dollar values reported by this release are seasonally adjusted and at an annual rate, ie, they tell us how much national income, spending, and savings would change over a year if August’s adjusted income and spending were extrapolated over an entire year…however, the percentage changes are computed monthly, from one month’s annualized figure to the next, and in this case of this month’s report they give us the percentage change in each annualized metric from July to August…..as they now try to explain in the opening line of the news release for this report, “Personal income increased $66.6 billion (0.2 percent at a monthly rate) in August“, which means that the annualized figure for seasonally adjusted personal income in August, $27,626.9 billion, was $66.6 billion, or more than 0.2% greater than the annualized personal income figure of $27,560.3 billion for July; the actual, unadjusted change in personal income from July to August, which would be on the order of one-twelfth of that size, is not given…similarly, annualized disposable personal income, which is income after taxes, rose by almost 0.3%, from an annual rate of $24,154.6 billion in July to an annual rate of $24,223.2 billion in August….the monthly contributors to the annualized $66.6 billion increase in personal income, which can be can be viewed in Table 2.6. of the National Income and Product Accounts, are therefore also annualized…in August, the major reasons for the $66.6 billion annual rate of increase in personal income were an annualized $36.6 billion increase in wages and salaries, and an annualized $22.9 billion increase in government social benefits to person, led by increases in Social security and Medicare benefits, and an $5.8 billion annualized increase in proprietors’ income, of which farmers saw a $3.7 billion annualized increase….
For personal consumption expenditures (PCE), BEA reports that they increased at a $190.8 billion annual rate, or by almost 0.9 percent, as the annual rate of PCE rose from $22,117.7 billion in July to $22,308.5 billion in August; that was after the July PCE figure was revised down from the originally reported $22,250.4 billion to $22,117.7 billion annually, while prior months were revised as well, revisions which were already included in the concurrent 3rd estimate of 2nd quarter GDP…..total personal outlays for August, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $190.7 billion to $23,232.9 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $990.2 billion annual rate in August, down from the revised $1,112.4 billion annualized personal savings in July… as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell from 4.6% in July to 4.1% in August, the lowest personal savings rate since November 2022…
Before personal consumption expenditures can be 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….the BEA does that by computing a price index for personal consumption expenditures, which is a chained price index based on 2017 prices = 100, and which is included in NIPA Table 2.8.4 for this report…….that index rose from 131.172 in July to 131.579 in August, a month over month inflation rate that’s statistically 0.3102796%, which BEA reports as a 0.3% increase, following the rounded 0.1% increase in the PCE price index they reported for July…applying that August inflation adjustment to the nominal change in August spending left real PCE up by 0.550669%, or by a rounded 0.6% in August, after a real PCE increase of 0.1% in July …note that when those price indexes are applied to a given month’s annualized PCE in current dollars, it yields that month’s annualized real PCE in chained 2017 dollars, which are the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….the BEA’s result for that is shown in NIPA Table 2.8.6, where we see that August’s chained dollar personal consumption total works out to 16,955.3 billion annually, 0.550334% more than July’s 16,862.5 billion, a difference in real PCE that the BEA reports as +0.6%…
However, to estimate the impact of the change in real PCE on the change in GDP, month over month changes such as that don’t help us much, since GDP is reported quarterly…thus we have to compare July and August’s real PCE to the the real PCE of the 3 months of the second quarter….while this report reports real PCE for each of those months separately, we can get their annualized average in NIPA Table 1.5.6 for the 2nd quarter GDP report, where we find that the annualized real PCE for the 2nd quarter was represented by 16,788.7 billion in chained 2017 dollars….then, by averaging the annualized chained 2017 dollar figures for July and August, 16,862.5 billion and 16,955.3 billion respectively, we get an equivalent annualized PCE for the two months of the 3rd quarter that we have data for so far….when we compare that average of 16908.9 billion to the 2nd quarter real PCE representation of of 16,788.7 billion, we find that 3rd quarter real PCE has grown at a 2.89% annual rate for the two months of the 3rd quarter that we have…{note the math we’ve used to get that annual growth rate: (((16,955.3 + 16,862.5) / 2) / 16,788.7 ) ^ 4 = 1.02894734 }…that’s a pace that would add 1.99 percentage points to the growth rate of the 3rd quarter, should there be no change in September’s real PCE from that July & August average…
Job Openings and Layoffs Fell in August, Hiring Rose, and Job Quitting was Little Changed
The Job Openings and Labor Turnover Survey (JOLTS) report for August from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 256,000, from 7,335,000 in July to 7,079,000 openings in August, after July job openings were revised 64,000 higher, from the 7,271,000 reported last month to 7,335,000 now….August jobs openings were still 2.3% higher than the 6,919,000 job openings reported for August a year ago, as the job opening ratio expressed as a percentage of the employed fell from 4.4% in July to 4.3% in August, but was still up from 4.2% in August a year ago…the largest percentage decrease in job openings was the 45,000 decrease to 50,000 job openings in real estate and rental and leasing, while job openings information sector increased by 45,000 to 123,000 (see table 1 for more details)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release…
The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit their jobs, and ‘other separations’, which includes retirements and deaths….in August, seasonally adjusted new hires totaled 5,192,000, up by 46,000 from the revised 5,146,000 who were hired or rehired in July, as the hiring rate as a percentage of all employed rose from 3.2% in July to 3.3% in August, and was also up from the 3.2% hiring rate in August a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations fell by 58,000, from 5,128,000 in July to 5,070,000 in August, while the separations rate as a percentage of the employed was unchanged at 3.2% in August, which was still down from the separations rate of 3.3% in August a year ago (see details in table 3)…subtracting the 5,070,000 total separations from the total hires of 5,192,000 would imply an increase of 122,000 jobs in August, a little less than the revised payroll job increase of 133,000 jobs in August reported by the September establishment survey later in the week, but still within the expected +/-110,000 margin of error in these incomplete survey extrapolations…..
Breaking down the seasonally adjusted job separations, the BLS finds that 3,066,000 of us voluntarily quit our jobs in August, down by 23,000 from the revised 3,089,000 who quit their jobs in July, while the quits rate, widely watched as an indicator of worker confidence, was unchanged at 1.9% of total employment, which was still down from the quits rate of 2.0% a year earlier (see details in table 4)….in addition to those who quit, 1,641,000 employees were either laid off, fired or otherwise discharged in August, down by 61,000 from the revised 1,702,000 who were discharged in July, while the discharges rate fell from 1.1% of all those who were employed during July to 1.0% of the employed in August, which was also also down from the 1.2% discharges rate in August of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 263,000 in August, up from 237,000 in July, for an ‘other separations rate’ of 0.2%, same as in July and as in August of last year….both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release…
Construction Spending Rose 0.9% in August, with July Implies 94 Basis Point Hit to 3rd Quarter GDP
The August report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending construction spending for the month was at an annual rate of $2,203.1 billion, which was 0.9 percent (±1.0 percent)* above the revised annualized estimate of $2,184.5 billion in construction spending in July, but was 4.1 percent (±1.6 percent) above the estimated annualized level of construction spending of August of last year….for the first eight months of this year, construction spending amounted to $1,428.5 billion, which was 7.6 percent (±1.2 percent) above the $1,327.0 billion spent over the same period in 2023…
July’s construction spending was originally reported at a $2,167.7 billion annual rate, so it has been revised almost 0.8% higher, to a $2,184.5 billion annual rate, while June’s construction spending was revised 0.9% higher, from the $2,167.7 billion annual rate reported last month to a $2,187.35 billion rate now…that annualized $19.6 billion upward revision to June spending would mean that 2nd quarter GDP was underestimated by about 0.13 percentage points, give or take, depending on inflation adjustments for the components revised…..however, the 2nd quarter’s GDP will not be revised to reflect that underestimation until the annual revision of next summer…
A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:
- Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,655.3 billion, 1.1 percent (±0.5 percent) above the revised July estimate of $1,637.7 billion. Residential construction was at a seasonally adjusted annual rate of $882.3 billion in August, 1.1 percent (±1.3 percent)* above the revised July estimate of $872.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $773.0 billion in August, 1.0 percent (±0.5 percent) above the revised July estimate of $765.0 billion.
- Public Construction: In August, the estimated seasonally adjusted annual rate of public construction spending was $547.8 billion, 0.2 percent (±2.0 percent)* above the revised July estimate of $546.8 billion. Educational construction was at a seasonally adjusted annual rate of $113.1 billion, 0.1 percent (±1.5 percent)* above the revised July estimate of $112.9 billion. Highway construction was at a seasonally adjusted annual rate of $150.6 billion, 0.1 percent (±5.6 percent)* above the revised July estimate of $150.5 billion.
This construction spending report is used as source data for 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and government investment outlays, for both state and local and Federal governments…. however, gauging the impact of revised July and August construction spending as reported here on 3rd quarter GDP is difficult because all figures given in this report are in nominal dollars at an annual rate, while data used to compute the change in GDP must be adjusted for changes in price…accurately adjusting construction spending for price changes is not easy either, because the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of BLS and privately published deflators that are used by the BEA for the various components of non-residential investment, such as the Engineering News Record construction cost index for utilities’ construction spending….so in lieu of trying to find and adjust for all of those obscure price indices, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed in order to come up with a ballpark estimate.
That producer price index showed that aggregate construction costs were unchanged in August, after rising 2.2% in July, rising 0.1% in June and rising 0.1% from April to May…on that basis, we can estimate that construction costs for August were roughly 2.2% more than those of June, roughly 2.3% more than those of May, and roughly 2.4% more than those of April, while obviously unchanged from those of July…we then use those percentages to inflate the lower cost spending figures for each of the 2nd quarter months, which, for comparison purposes, is arithmetically the same as adjusting higher cost July & August construction spending downward…annualized construction spending in millions of dollars for the second quarter months is shown at $2,187,350 for June, $2,168,396 for May, and $2,168,231 for April in this report, while it was at $2,184,474 million for July and $2,203,129 million for August….thus to compare July and August’s inflation adjusted construction spending to that of the second quarter, our formula becomes: ((2,203,129 + 2,184,474 * 1.000 ) / 2 ) / (( 2,187,350 * 1.022 + 2,168,396 * 1.023 + 2,168,231 * 1.024 ) / 3) = 0.98612455465, meaning real construction over July and August averaged 1.39% lower than that of the 2nd quarter….hence, that means that after crudely adjusting for inflation, we can estimate that real construction for the 3rd quarter fell at a 5.44% annual rate from that of the 2nd quarter….put another way, that’s a decrease at a $30,868 billion annual rate, which suggests that if September should show no improvement, the decrease in real construction would subtract a net of about 0.47 percentage points from 3rd quarter GDP across those components that it is source data for..
Factory Shipments unchanged in August, Factory Inventories Rose 0.5%
The August Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $0.7 billion or 0.1 percent to $663.5 billion in August, following an increase of 0.8% to $662.8 billion in July, which was revised from the 0.9% increase to $663.6 billion in new goods orders for July reported last month….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only accurate as revised updates to the August advance report on durable goods that we reported on last week…on those revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we’ll just quote directly from that summary here:
- Summary: New orders for manufactured goods in August, up two consecutive months, increased $0.7 billion or 0.1 percent to $663.5 billion, the U.S. Census Bureau reported today. This followed a 0.8 percent July increase. Shipments, down following eight consecutive monthly increases, decreased less than $0.1 billion or virtually unchanged to $658.6 billion. This followed a 0.8 percent July increase. Unfilled orders, up twenty-five of the last twenty-six months, increased $9.9 billion or 0.6 percent to $1,609.6 billion. This followed a 0.6 percent July increase. The unfilled orders-to-shipments ratio was 6.87, up from 6.81 in July. Inventories, up eleven consecutive months, increased $5.1 billion or 0.5 percent to $972.4 billion. This followed a 0.4 percent July increase. The inventories-to-shipments ratio was 1.48, up from 1.47 in July.
- New Orders for manufactured durable goods in August, down following two consecutive monthly increases, decreased $0.2 billion or 0.1 percent to $338.5 billion, down from the previously published virtually unchanged decrease. This followed a 0.9 percent July increase. Transportation equipment, down three of the last four months, drove the decrease, $0.8 billion or 0.7 percent to $114.1 billion. New orders for manufactured nondurable goods increased $0.9 billion or 0.3 percent to $325.0 billion.
- Shipments of manufactured durable goods in August, down following eight consecutive monthly increases, decreased $0.9 billion or 0.3 percent to $333.6 billion, down from the previously published 0.2 percent decrease. This followed a 0.9 percent July increase. Transportation equipment, also down following eight consecutive monthly increases, drove the decrease, $2.0 billion or 1.8 percent to $109.4 billion. Shipments of manufactured nondurable goods, up eight of the last nine months, increased $0.9 billion or 0.3 percent to $325.0 billion. This followed a 0.7 percent July increase. Petroleum and coal products, up seven of the last eight months, drove the increase, $0.9 billion or 1.4 percent to $70.7 billion.
- Unfilled Orders for manufactured durable goods in August, up twenty-five of the last twenty-six months, increased $9.9 billion or 0.6 percent to $1,609.6 billion, unchanged from the previously published increase. This followed a 0.6 percent July increase. Transportation equipment, up twelve of the last thirteen months, led the increase, $4.7 billion or 0.5 percent to $1,009.9 billion.
- Inventories of manufactured durable goods in August, up eleven consecutive months, increased $3.2 billion or 0.5 percent to $608.3 billion, unchanged from the previously published increase. This followed a 0.5 percent July increase. Transportation equipment, up ten of the last eleven months, led the increase, $1.2 billion or 0.6 percent to $192.7 billion. Inventories of manufactured nondurable goods, up six of the last seven months, increased $1.8 billion or 0.5 percent to $364.0 billion. This followed a 0.3 percent July increase. Petroleum and coal products, up two consecutive months, led the increase, $1.2 billion or 2.5 percent to $49.0 billion. By stage of fabrication, August materials and supplies increased 0.6 percent in durable goods and 0.9 percent in nondurable goods. Work in process increased 0.8 percent in durable goods and 1.1 percent in nondurable goods. Finished goods increased 0.1 percent in durable goods and were virtually unchanged in nondurable goods
To gauge the effect of August factory inventories on 3rd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the value of finished goods inventories was 0.1% higher at $330,046 million; the value of work in process inventories was 0.9% higher at $276,346 million, and the value of materials and supplies inventories was 0.7% higher at $365,990 million.…meanwhile, the producer price index for August indicated that prices for finished goods were on average 1.1% higher, that prices for intermediate processed goods were 1.8% higher, and that prices for unprocessed goods were 1.1% higher….assuming average valuations will be similar for like inventories, we could thus estimate that August’s real finished goods inventories decreased by 1.0%, that real inventories of intermediate processed goods decreased by 0.9%, and that real raw material inventory inventories were about 0.4% lower…while on net it the appears that August’s real inventories were somewhat lower, they follow July’s factory inventory change, when real inventories were higher by somewhat more…since real NIPA factory inventories were down sharply in the 2nd quarter, accounting for about three-fourths of the quarter’s inventory decrease, that two months of factory inventory data appears to indicate a small real increase in July factory inventories would therefore mean that the difference between the 2nd quarter decrease and the July increase would be added to the 3rd quarter’s real growth in GDP…
>> (the above is the synopsis that accompanied my regular sunday morning news links emailing, which in turn was mostlyselected from my weekly blog poston theglobal glass onion…if you’d be interested in receiving my weekly emailing of selected links, most of which are chosen from the aforementioned GGO posts,contact me…)
