May’s consumer and producer prices, retail sales, industrial production; April’s business inventories and JOLTS

Major reports released during the past week included the May Consumer Price Index, the May Producer Price Index, and the May Import-Export Price Index, all from the Bureau of Labor Statistics; the reports on Retail Sales for May and Business Sales and Inventories for April, both from the Census bureau; the report on Industrial Production and Capacity Utilization for May from the Fed, and the Job Openings and Labor Turnover Survey (JOLTS) for April from the Bureau of Labor Statistics…

May Consumer Prices Up 0.1% on Higher Food Prices, Rent

The consumer price index rose 0.1% in May as higher prices for food and shelter were partially offset by lower prices for energy and used cars…. the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers rose 0.1% in May after it had risen 0.3% in April, 0.4% in March, 0.2% in February, been unchanged in January, in December and in November, and had risen 0.3% in October, 0.1% in September, 0.1% in August, and 0.2% last July…the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 255.548 in April to 256.092 in May, which left it statistically 1.790% higher than the 251.588 index reading in May of last year, which is reported as a 1.8% year over year increase….with higher prices for food and lower prices for energy having offsetting impacts on the overall index, seasonally adjusted core prices, which exclude food and energy, also rose by 0.1% for the month, as the unadjusted core price index rose from 262.332 to 262.590, which left the core index 1.989% ahead of its year ago reading of 257.469, which is reported as a 2.0% year over year increase, down from 2.1% in April…

The volatile seasonally adjusted energy price index fell 0.6% in May, after rising 2.9% in April, 3.5% in March, 0.4% in February, falling 3.1% in January, falling 2.6% in December, falling 2.8% in November, rising by 2.1% in October, and falling by 1.0% in September, and is now 0.5% lower than in May a year ago…the price index for energy commodities was 0.4% lower in April, while the index for energy services fell 0.8%, after falling by 0.1% in April …the energy commodity index was down 0.4% due to a 0.5% decrease in the price of gasoline, the largest component, and a 0.3% decrease in the index for fuel oils, while prices for other energy commodities, including propane, kerosene, and firewood, averaged 0.9% higher…within energy services, the price index for utility gas service fell 1.0% after falling 0.8% in April and is now 2.6% lower than it was a year ago, while the electricity price index fell 0.8%, after it was unchanged in April ….energy commodities are now 0.3% lower than their year ago levels, with gasoline prices averaging 0.2% lower than they were a year ago, while the energy services price index is 0.7% lower than last May, as electricity prices are now also 0.2% lower than a year ago…

The seasonally adjusted food price index was 0.3% higher in April, after falling 0.1% in April, but after rising 0.3% in March, 0.4% in February, 0.2% in January, 0.3 in December, 0.2% in November, being unchanged in October, rising 0.1% in September, 0.1% in August, and 0.1% in July, as the price index for food purchased for use at home rose 0.3% in April, while the index for food bought to eat away from home was 0.2% higher, as prices at fast food outlets rose 0.2% and prices at full service restaurants also rose 0.2%, while food from vending machines and mobile vendors were on average 1.2% higher…

In the food at home categories, the price index for cereals and bakery products was 0.4% higher even though average bread prices fell 0.1%, because the price index for cakes, cupcakes, and cookies rose 1.1%, the price index for fresh biscuits, rolls, & muffins rose 1.3%, and the price index for other bakery products rose 1.5%….at the same time, the price index for the meats, poultry, fish, and eggs group was 0.8% higher, even as egg prices fell 2.2%, because fresh fish & seafood prices averaged 1.9% higher and the pork price index rose 2.4%…in addition, the seasonally adjusted index for dairy products was 0.7% higher, as both ice cream and cheese prices rose 0.7% and the price index for other dairy products rose 0.9%…on the other hand, the fruits and vegetables index was 0.8% lower on a 1.3% decrease in the price index for fresh fruits, and a 0.7% decrease in the price index for fresh vegetables, led by a 7.9% drop in lettuce prices….but the beverages index was 1.2% higher, as the index for noncarbonated juices and drinks rose 1.2% and carbonated drink prices were 1.0% higher…lastly, the index for the ‘other foods at home’ category was unchanged, as the index for fats and oils other than butter and margarine rose 1.8% while the index for frozen and freeze dried prepared foods fell 0.7%….the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall…since last May, only eggs, which are down 15.6% from a year ago, are the only ‘food at home’ line items that have seen prices change by more than 10% over the past year…

Among the seasonally adjusted core components of the CPI, which rose by 0.1% in April after rising by 0.1% in April, 0.1% in March, 0.1% in February, and by 0.2% for the five months prior to that, after rising by 0.1% in August 0.2% in July, 0.2% in June, and by 0.2% last May, the composite price index of all goods less food and energy goods was 0.1% lower, while the more heavily weighted composite for all services less energy services was 0.2% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust April retail sales for inflation in national accounts data, the index for household furnishings and supplies was up 0.3%, as the price index for dishes and flatware rose 5.0%, the price index for living room, kitchen, and dining room furniture rose 1.2%, while the price index for appliances was 0.8% lower….at the same time, the apparel price index was unchanged as a 2.5% increase in the price index for women’s dresses was offset by a 1.4% decrease in the price index for men’s suits, sport coats, and outerwear and a 2.5% decrease in the price index for boys & girls footwear…meanwhile, the price index for transportation commodities other than fuel was 0.4% lower even as prices for new cars rose 0.2%, as prices for new trucks fell 0.1% and prices for used cars and trucks fell 1.4%…likewise, prices for medical care commodities also averaged 0.4% lower as prescription drugs prices fell 0.2%….on the other hand, the recreational commodities index was 0.1% higher despite a 1.5% decrease in TV prices, as the index for recorded music and music subscriptions rose 1.0%, the price index for sports equipment rose 1.6%, and the price index for newspapers and magazines rose 2.2%….however, the education and communication commodities index was 0.5% lower on a 0.8% decrease in the index for educational books and supplies and a 1.0% decrease in the index for telephone hardware, calculators, and other consumer information items…lastly, a separate price index for alcoholic beverages was 0.4% higher on a 1.5% increase in wine at home prices, while the price index for ‘other goods’ rose 0.3% on a 1.5% increase in the price index for miscellaneous personal goods…

Within core services, the price index for shelter rose 0.2% on a 0.3% increase in rents, a 0.3% increase in homeowner’s equivalent rent, and a 0.1% decrease in lodging away from home at hotels and motels, while the shelter sub-index for water, sewers and trash collection rose 0.2%, and household operation costs were on average 0.6% lower….at the same time, the price index for medical care services was 0.5% higher, as inpatient hospital services rose 0.6% and health insurance rose 1.5%…meanwhile, the transportation services index was 0.1% higher as car and truck rentals and airfares both rose 2.0% while vehicle repairs fell 0.7% and motor vehicle insurance fell 0.4%…on the other hand, the recreation services price index was 0.5% lower as the index for rental of video discs and other media fell 1.2% and admissions to sporting events fell 3.1%….meanwhile, the index for education and communication services was 0.2% higher as child care and nursery school tuitions rose 0.6% and land-line telephone services rose 0.5%….lastly, the index for other personal services was up 0.3% as the price index for tax return preparation and other accounting fees rose 3.6%…among core line items, prices for televisions, which are still 18.6% cheaper than a year ago, and the price index for telephone hardware, calculators, and other consumer information items, which is down by 13.8% since last May, have both seen prices drop by more than 10% over the past year, while the cost of health insurance, which is up by 12.4% over the past year, and the price index for infants’ furniture, which has now increased 12.3% year over year, are the only line items to have increased by a double digit magnitude over that span….

May Retail Sales Up 0.5% After April Sales Revised 0.5% Higher

Seasonally adjusted retail sales rose 0.5% in May after retail sales for April were revised 0.5% higher….the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $519.0 billion for the month, which was an increase of 0.5 percent (±0.5%)* from April’s revised sales of $516.2 billion and 3.2 percent (±0.7 percent) above the adjusted sales of May of last year…April’s seasonally adjusted sales were revised from the $513.4 reported last month to $516.4 billion, while March sales were revised from $514.3 billion to $514.7 billion, which means that March to April percent change was revised from down 0.2 percent (±0.5 percent)* to an increase of 0.3 percent (±0.1 percent)….estimated sales before seasonal adjustments, which were extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 7.5% before adjustment, from $511,071 million in April to $549,391 million in May, while they were up 3.5% from the $531,011 million of sales in May a year ago…

Included below is the table of the monthly and yearly percentage changes in sales by business type taken from the Census pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from April to May in the first sub-column, and then the year over year percentage change for those businesses since last May in the 2nd column; the second pair of columns gives us the revision of last month’s April advance monthly estimates (now called “preliminary”) as revised in this report, likewise for each business type, with the March to April change under “Mar 2019 r” (revised) and the revised April 2018 to April 2019 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance April estimates, before this month’s revision, is here….

May 2019 retail sales table

To compute May’s real personal consumption of goods data for national accounts from this May retail sales report, the BEA will use the corresponding price changes from the May consumer price index, which we reviewed earlier…to estimate what they will find, we’ll first separate out the usually volatile sales of gasoline from the other totals…from the third line on the above table, we can see that May retail sales excluding the 0.3% increase in sales at gas stations were up by 0.6%….then, pulling the 0.1% decrease in grocery & beverage sales and the 0.7% increase in food services sales out from that total, we find that core retail sales were up by nearly 0.7% for the month…since the May CPI report showed that the the composite price index of all goods less food and energy goods was 0.1% lower in April, we can thus figure that real retail sales excluding food and energy, or real core PCE, will show an increase of almost 0.8%…however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were up 0.7%, the April price index for transportation commodities other than fuel was 0.4% lower, which would suggest that real sales at auto & parts dealers were something on the order of 1.1% higher once price decreases are taken into account… on the other hand, while nominal sales at furniture stores were 0.1% higher in May, the furniture price index was 0.7% higher, which means that real sales of furniture likely fell around 0.6%…

In addition to figuring those core retail sales, to make an estimate we’ll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do…the May CPI report showed that the food price index was 0.3% higher, as the price index for food purchased for use at home rose 0.3% while the index for food bought away from home was 0.2% higher…thus, while nominal sales at food and beverage stores were 0.1% lower, real sales of food and beverages would have been around 0.4% lower in light of the 0.3% higher prices…meanwhile, the 0.7% increase in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants only rose around 0.5% during the month…on the other hand, while sales at gas stations were up 0.3%, there was also a 0.5% decrease in the price of gasoline during the month, which would suggest that real sales of gasoline were up on the order of 0.8% higher, with a caveat that gasoline stations do sell more than gasoline…by averaging those real sales figures with an appropriate weighting, and excluding food services, we’d estimate that the income and outlays report for May will show that real personal consumption of goods rose by around 0.6% in May, after rising by a revised 0.6% in April and by a revised 2.1% in March, but after falling by a 0.7% in February and rising by 0.7% in January…at the same time, the 0.5% increase in real sales at bars and restaurants should have a small positive impact on May’s real personal consumption of services…

Industrial Production Up 0.4% in May; Capacity Utilization Up 0.2%

Industrial production increased in May after production for prior months was revised lower…the Fed’s G17 release on Industrial production and Capacity Utilization for April reported that industrial production increased 0.4% in May after falling by a revised 0.4% in April, which left total output 2.0% higher than a year ago, up from last month’s 0.9% year over year figure…the industrial production index, with it now benchmarked for average 2012 production to be equal to 100.0, rose from an unrevised 109.2 in April to 109.6  in May, after the March reading for the index was revised down from 109.7 to 109.6 and the February index was revised from 109.6 to 109.5…

The manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.2, from 104.6 in April to 104,8 in May, after the April manufacturing index was revised from 104.7 to 107.6, leaving manufacturing output just 0.7% higher than a year ago…in addition, the manufacturing index for March was revised from 105.2 to 105.1, the manufacturing index for February was also revised from 105.2 to 105.1, and the manufacturing index for January was revised up from 105.7 to 105.8….meanwhile, the mining index, which includes oil and gas well drilling, increased from 132.8 in April to 132.9 in May, after the April index was revised up from from the originally reported 132.4, which left the mining index 10.0% higher than it was a year earlier….finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, rose 2.1% to 105.7 in May, after decreasing by a revised 3.1% in a warmer than normal April, and is now 0.2% above it’s year earlier level…

This report also includes capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 78.1% in May from an unrevised 77.9% in April, after capacity utilization for March was revised down from 78.5% to 78.4%….capacity utilization for all manufacturing industries rose from a downwardly revised 76.1% in April to 76.2% in May, as utilization of NAICS durable goods production facilities rose from 75.5% in April to 75.6% in May, while capacity utilization for non-durables manufactures was unchanged at 76.8%….capacity utilization for the mining sector actually fell to 91.3% in May, from 91.6% in April, which was originally reported as 91.4%, while utilities were operating at 77.5% of capacity during May, up from the revised 76.1% of capacity during April, which was was originally reported at 76.2% ….for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories…. 

Producer Prices up 0.1% in May on Higher Margins for Transportation and Core Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.1% in May as prices for finished wholesale goods averaged 0.2% lower while average margins of final services providers rose 0.3%…that followed that followed an April report that had the PPi 0.2% higher, when prices for finished wholesale goods averaged 0.3% higher, while average margins of final services providers rose 0.1%, a March report that showed the PPI had increased by 0.6%, with prices for finished wholesale goods up 1.0% and margins of final services providers up 0.3%, a revised February report that showed the PPI had increased by 0.3%, with prices for finished wholesale goods on average 0.3% higher, while margins of final services providers rose by 0.2%, and a revised January report that showed the PPI was 0.3% lower, with prices for finished wholesale goods on average 0.6% lower, while margins of final services providers had decreased by 0.1%…on an unadjusted basis, producer prices are 1.8% higher than a year ago, down from the 2.2% year over year increase that had been indicated by last month’s report…meanwhile, the core producer price index, which excludes food, energy and trade services, was up 0.4% for the month, and is now also 2.3% higher than in May a year ago, up from the 2.2% YoY increase shown a month ago…

As we noted, the price index for final demand for goods, aka ‘finished goods’, was 0.2% lower in May, after being 0.3% higher in April, 1.0% higher in March, 0.3% higher in February, 0.6% lower in January, 0.6% lower in December, 0.5% lower in November, 0.8% higher in October, and 0.1% lower in September….the finished goods index fell in May because the price index for wholesale energy was 1.0% lower, after rising 1.8% in April and 5.6% in March, while the price index for wholesale foods fell 0.3% after falling 0.2% in April, and while the index for final demand for core wholesale goods (excluding food and energy) was unchanged for the third time in four months…wholesale energy prices fell on a 1.7% decrease in the wholesale price for gasoline, a 5.7% drop in wholesale prices for diesel fuel, and 7.6% lower wholesale prices for liquefied petroleum gas, while the wholesale food price index fell on a 28.3% decrease in wholesale prices for fresh eggs and a 6.8% decrease in wholesale prices for fresh fruits and melons….among wholesale core goods, the wholesale price index for sporting and athletic goods rose 5.8% while wholesale prices for iron and steel scrap fell 8.3%..

At the same time, the index for final demand for services rose 0.3% in May, after rising 0.1% in April, 0.3% in March, 0.2% in February, but after falling a revised 0.1% in January, as the May index for final demand for trade services fell 0.5% in May while the index for final demand for transportation and warehousing services rose 0.7% and the core index for final demand for services less trade, transportation, and warehousing services was 0.5% higher….among trade services, seasonally adjusted margins for TV, video, and photographic equipment and supplies retailers fell 4.5%, margins for computer hardware, software, and supplies retailers fell 4.2%, and margins for apparel, jewelry, footwear and accessories retailers fell 5.2%, while margins for fuels and lubricants retailers rose 5.9%… among transportation and warehousing services, margins for airline passenger services rose 1.7% and margins for rail transportation of freight and mail rose 0.7%…among the components of the core final demand for services index, margins for guestroom rental jumped 10.1%, margins for arrangement of cruises and tours rose 8.4% and margins for traveler accommodation services rose 9.2%..

This report also showed the price index for intermediate processed goods fell 0.2% in May, after falling 0.1% in April, rising 0.8% in March, being unchanged in February, and falling a revised 0.9% in January…the price index for intermediate energy goods fell 1.4%, as refinery prices for gasoline fell 1.7% and refinery prices for residual fuels fell 5.7%, while producer prices for liquefied petroleum gas fell 7.6%…at the same time, prices for intermediate processed foods and feeds fell 0.5%, as the producer price index for prepared animal feeds fell 1.9%…on the other hand, the core price index for intermediate processed goods less food and energy rose 0.1% as producer prices for primary basic organic chemicals increased 5.8% while producer prices for hardwood lumber fell 2.2% and prices for softwood lumber fell 1.3%… prices for intermediate processed goods are now 0.6% higher than in May a year ago, the first year over year decrease following 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016….

Meanwhile, the price index for intermediate unprocessed goods fell 5.1% in May after rising 2.7% in April, 2.3% in March, but after falling a revised 4.7% in February and a revised 4.6% in January….that was as the May price index for crude energy goods fell 8.2% as producer prices for natural gas dropped 15.2% and crude oil prices fell 6.2%, and as the price index for unprocessed foodstuffs and feedstuffs  fell 1.9% on a 4.0% decrease in producer prices for slaughter steers and heifers and an 8.4% drop in producer prices for slaughter turkeys…at the same time, the index for core raw materials other than food and energy materials fell 4.5%, as wastepaper prices fell 16.8%, prices for aluminum base scrap fell 12.0% and prices for iron & steel scrap declined 8.3%…this raw materials index is now 8.9% lower than a year ago, the largest year over year decrease in nearly 3 years

Lastly, the price index for services for intermediate demand was unchanged in May, after rising 0.3% in April, 0.4% in March, being unchanged in February, rising 0.2% in January, and rising 0.1% in December and in November…the price index for intermediate trade services was 0.6% lower, as margins for intermediate metals, minerals, and ores wholesalers fell 1.9% and margins for intermediate machinery and equipment parts and supplies wholesalers fell 1.2%…on the other hand, the index for transportation and warehousing services for intermediate demand rose 0.4%, as the intermediate index for transportation of passengers (partial) rose 1.7%…meanwhile, the core price index for intermediate services less trade, transportation, and warehousing was unchanged, as the index for credit intermediation, incl. trust services (partial) rose 4.3% and the index for traveler accommodation services rose 9.2%….over the 12 months ended in May, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 2.5% higher than it was a year ago…

April Business Sales Down 0.2%, Business Inventories Up 0.5%

Following the release of the May retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for April(pdf), which incorporates the revised April retail data from that May report and earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,462.0 billion in April, down 0.2 percent (±0.2 percent)* from March revised sales, but up 2.8 percent (±0.3 percent) from April sales of a year earlier…note that total March sales were revised from the originally reported $1,470.1 billion to $1,465.4 billion, and as a result the March increase from February was lowered from 1.6% to 1.3%….manufacturer’s sales were down 0.5% from March at $504,087 million in April, while retail trade sales, which exclude restaurant & bar sales from the revised April retail sales reported earlier, rose 0.3% to $454,781 million, while wholesale sales fell 0.4% to $503,115 million..

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,029.8 billion at the end of April, up 0.5 percent (±0.1%) from March, and 5.3 percent (±0.5 percent) higher than in April a year earlier…the value of end of March inventories was revised from the $2,018.1 billion reported last month to $2,019.0 billion with this release, still considered statistically unchanged from February…seasonally adjusted inventories of manufacturers were estimated to be valued at $692,949 million, 0.3% higher than in March, inventories of retailers were valued at $661,291 million, 0.5% more than in March, while inventories of wholesalers were estimated to be valued at $675,538 million at the end of April, up 0.8% from March.

With the release of the factory inventory data last week, we judged that the real change in April factory inventories would have a negative impact on the growth rate of 2nd quarter GDP; on the other hand, with the release of the wholesale inventory figures a few days later, we hedged on whether the impact would be positive or negative….since the April producer price index reported that prices for finished goods were on average 0.3% higher, that means that the real increase in retail inventories was only around 0.2% for the month…so it appears that real retail inventories are also not keeping up with the 1st quarter increase in real retail inventories that was indicated by the key source data and assumptions (xls) in the second estimate of 1st quarter GDP, and hence are on pace to be a negative for 2nd quarter GDP…

Job Openings and Job Quitting Little Changed in April; Hiring and Firing Rose

The Job Openings and Labor Turnover Survey (JOLTS) report for April from the Bureau of Labor Statistics estimated that seasonally adjusted job openings slipped by 25,000, from 7,474,000 in March to 7,449,000 job openings in April, after March job openings were revised a bit lower, from 7,488,000 to 7,474,000…April’s jobs openings were still 4.8% higher than the 7,106,000 job openings reported for April a year ago, as the job opening ratio expressed as a percentage of the employed remained unchanged at 4.7% in April, while it was up from 4.6% a year ago…the greatest increase in April job openings was in construction, where openings rose by 40,000 to 404,000, while job openings in professional and business services fell by 172,000 to 1,241,000… (details on job openings by industry and region can be viewed in Table 1)…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 to at the end of the release…

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in April, seasonally adjusted new hires totaled 5,937,000, up by 240,000 from the revised 5,697,000 who were hired or rehired in March, as the hiring rate as a percentage of all employed rose from 3.8% to 3.9%, which was also up from the 3.8% hiring rate in April a year earlier (details of hiring by industry since December are in table 2)….meanwhile, total separations also rose, by 70,000, from 5,508,000 in March to 5,578,000 in April, as the separations rate as a percentage of the employed remained at 3.7%, which was also the separations rate in April a year ago (see table 3)…subtracting the 5,578,000 total separations from the total hires of 5,937,000 would imply an increase of 359,000 jobs in April, quite a bit more than the revised payroll job increase of 224,000 for April reported by the May establishment survey last week, and outside the expected +/-115,000 margin of error in these incomplete samplings, so one or both of these surveys is off on job creation data by a statistically significant amount…

Breaking down the seasonally adjusted job separations, the BLS finds that 3,482,000 of us voluntarily quit our jobs in April, up by 21,000 from the revised  3,461,000 who quit their jobs in March, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.3% of total employment, which was up from 2.2% a year earlier (see details in table 4)….in addition to those who quit, another 1,752,000 were either laid off, fired or otherwise discharged in April, up by 59,000 from the revised 1,693,000 who were discharged in March, as the discharges rate rose from 1.1% to 1.2% of all those who were employed during the month, which brought it back up to the 1.2% level of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 344,000 in April, down from 354,000 in March, for an ‘other separations’ rate of 0.2%, the same as in March, and the same as in April a year ago….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

 

(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 picked from the aforementioned GGO posts, contact me…)       

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tables and graphs for June 15th

retail sales:

May 2019 retail sales table

rig count summary:

June 14 2019 rig count summary

OPEC production:

May 2019 OPEC crude output via secondary sources

global oil output:

May 2019 OPEC report global oil supply

global oil demand:

May 2019 OPEC report global oil demand

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natural gas prices hit 3 year lows; record oil output; record jump in oil + products inventories; rigs at a 16 month low

oil prices managed to eke out a small increase this week, but not before hitting a new 5-month low and crashing into a bear market mid-week…after falling 9% to $53.50 a barrel last week after Trump had threatened new tariffs on Mexico, the price of US crude for July delivery opened lower and fell as much as 2.6% early Monday, as traders remained rattled by Trump’s tariff threats and his termination of India’s trade status until Saudi comments that OPEC would continue their cuts through the second half of the year changed their focus and stabilized prices, which recovered to end 25 cents, or 0.5%, lower at $53.25 a barrel…oil prices started lower again on Tuesday on evidence that an economic slowdown would dent energy demand but again recovered in the afternoon to end 23 cents higher at $53.48 a barrel…however, oil prices tumbled in after hours trading after the API reported major inventory increases and thus opened lower again on Wednesday, and subsequently crashed Into a bear market after the EIA reported the biggest stock build in 30 years, with prices falling more than 4% to $50.60 a barrel before recovering near the close to finish down $1.80 at $51.68 a barrel…oil prices initially drifted lower again on Thursday but turned sharply higher near the close on a report that the Trump administration might delay its tariffs on Mexican imports, and closed up 91 cents at $52.59 a barrel…prices continued to rally on hopes for a deal with Mexico early Friday, then rose nearly 3% after Saudi Arabia said OPEC was close to agreeing to extend an output production cut beyond June to close $1.40 higher at $53.99 a barrel…oil prices thus erased their early losses and ended with a gain of nearly 1% for the week, despite having crossed the 20% loss threshold that is considered a bear market earlier in the week

natural gas prices, meanwhile, tumbled to successive new three year lows, first on ongoing forecasts for below normal mid-June temperatures in the Great Lakes and Midwest states, which would delay air conditioning demand, and then on a near record storage build that exceeded analysts expectations…after falling 15.7 cents to a 35 month low of $2.454 per mmBTU last week, natural gas for July delivery fell 5.1 cents to a three year low of $2.403 per mmBTU on Monday, as the 11 to 15 day forecast called for below normal temperatures from the Rockies south to Texas and east to the Appalachians…persistence of that cool June forecast drove prices to another 3 year low of $2.378 per mmBTU on Wednesday, and then the EIA’s report of a larger-than-expected increase in natural gas supplies knocked prices down 5.4 cents to yet another 3 year low of $2.324 per mmBTU on Thursday…to show you what this week’s prices look like compared to the recent price trajectory, we’ll include a graph of natural gas prices over the past 3 years…

June 8 2019 natural gas prices

the above graph is a Saturday afternoon screenshot of the interactive US natural gas price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets…each bar on the above graph ​portion above ​represents natural gas prices for a week of trading between the last week of May 2016 and this past week, wherein the green bars represent the weeks when the price of natural gas went up, and red bars represent the weeks when the price of natural gas went down…for green bars, the starting natural gas price at the beginning of the week is at the bottom of the bar and the price at the end of the week is at the top of the bar, while for red or down weeks, the starting price is at the top of the bar and the price at the end of the week is at the bottom of the bar…also barely visible on this shrunken “candlestick” style graph are the very faint grey “wicks” above and below each bar, to indicate trading prices during the week that were above or below the opening to closing price range for that week…(the lighter red & green bars at the bottom of the graph represent the trading volume for each day, which doesn’t concern us today)…as you can see, natural gas prices have rarely plumbed this depth, and the last time they did, drilling new wells for natural gas virtually dried up, with the ​national ​natural gas rig count falling to as low as 81 rigs the following summer, which was the lowest natural gas rig count ​over the time Baker Hughes had been keeping records…

the natural gas storage report from the EIA for the week ending May 31st indicated that the quantity of natural gas held in storage in the US increased by 119 billion cubic feet to 1,986 billion cubic feet by the end of the week, which meant our gas supplies were 182 billion cubic feet, or 10.1% more than the 1,804 billion cubic feet that were in storage on June 1st of last year, while still 240 billion cubic feet, or 10.8% below the five-year average of 2,226 billion cubic feet of natural gas that have typically been in storage as of the end of May in recent years….this week’s 119 billion cubic feet injection into US natural gas storage was above the median forecast of a Reuters’ poll of analysts for a 109 billion cubic foot increase in supplies, and likewise ​much ​higher than the average 102 billion cubic feet of natural gas that have been added to gas storage during the same week of spring in recent years….the 119 billion cubic feet injection also appears to be the third largest injection over the past 5 years, and the 879 billion cubic feet of natural gas that have been added to storage over the past 10 weeks has been the largest injection of gas into storage on record for any similar period this early in the injection season…

The Latest US Oil Supply and Disposition Data from the EIA

this week’s US oil data from the US Energy Information Administration, reporting on the week ending May 31st, showed that a big increase in our oil imports resulted in a similar increase in our stored crude supplies, the eighth such increase in 11 weeks…our imports of crude oil rose by an average of 1,065,000 barrels per day to an average of 7,927,000 barrels per day, after falling by an average of 81,000 barrels per day over the prior week, while our exports of crude oil fell by an average of 19,000 barrels per day to 3,298,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 4,629,000 barrels of per day during the week ending May 31st, 1,084,000 more barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was reported to be 100,000 barrels per day higher at a record 12,400,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 17,029,000 barrels per day during this reporting week…

meanwhile, US oil refineries were​ reportedly​ using 16,938,000 barrels of crude per day during the week ending May 31st, 171,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net of 967,000 barrels of oil per day were being added to of the oil that’s in storage in the US….hence, it appears that this week’s crude oil figures from the EIA seem to indicate that our total working supply of oil from net imports and from oilfield production was 876,000 barrels per day short of what was added to storage plus what the oil refineries reported they used during the week…to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+876,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”….with that much oil unaccounted for, we have to figure one or more of this week’s crude oil metrics are off by a statistically significant amount…(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….  

further details from the weekly Petroleum Status Report (pdf) indicated that the 4 week average of our oil imports rose to an average of 7,336,000 barrels per day last week, still 7.5% less than the 7,934,000 barrel per day average that we were importing over the same four-week period last year…the 967,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, as the amount of oil stored in our Strategic Petroleum Reserve was unchanged…this week’s crude oil production was reported to be 100,000 barrels per day higher at a record 12,400,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at a record 11,900,000 barrels per day, while a 4,000 barrel per day increase to 478,000 barrels per day in Alaska’s oil production was not enough to impact the final rounded national total…last year’s US crude oil production for the week ending June 1st was rounded to 10,800,000 barrels per day, so this reporting week’s rounded oil production figure was roughly 14.8% above that of a year ago, and 47.1% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at 91.8% of their capacity in using 16,938,000 barrels of crude per day during the week ending May 31st, up from 91.2% of capacity the prior week, but still a bit below the recent historical refinery utilization rate for this time of year​, when refineries are often running flat out​….likewise, the 16,938,000 barrels per day of oil that were refined this week were 2.5% below the 17,369,000 barrels of crude per day that were being processed during the week ending June 1st, 2018, when US refineries were operating at 95.4% of capacity… 

with the increase in the amount of oil being refined, gasoline output from our refineries was similarly higher, increasing by 186,000 barrels per day to 10,049,000 barrels per day during the week ending May 31st, after our refineries’ gasoline output had decreased by 20,000 barrels per day the prior week….with that increase in gasoline output, this week’s gasoline production was 4.0% more than the 9,658,000 barrels of gasoline that were being produced daily during the same week last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) jumped by 222,000 barrels per day to 5,404,000 barrels per day, after our distillates output had decreased by 24,000 barrels per day the prior week…but even with this week’s big increase, the week’s distillates production was only 1.5% more than the 5,324,000 barrels of distillates per day that were being produced during the week ending June 1st, 2018…. 

with the increase in our gasoline production, our supply of gasoline in storage at the end of the week rose for the fourth time in 16 weeks, increasing by 3,205,000 barrels to 234,149,000 barrels over the week to May 31st, after our gasoline supplies had increased by 2,204,000 barrels over the prior week….our gasoline supplies rose this week as our imports of gasoline rose by 8,000 barrels per day to 1,095,000 barrels per day, and as our exports of gasoline fell by 38,000 barrels per day to 679,000 barrels per day, while the amount of gasoline supplied to US markets increased by 47,000 barrels per day to 9,441,000 barrels per day….after our gasoline supplies had reached an all time record high seventeen weeks ago, and then had fallen by nearly 13% over 10 weeks while US Gulf Coast refineries were crippled by the Venezuelan sanctions, our gasoline supplies have now recovered by over 4% in the past 3 weeks and now are back to 2% above the five year average of our gasoline supplies at this time of the year (while still 2.0% lower than last June 1st’s inventory level of 239,034,000 barrels), as replacement gasoline supplies have been arriving from Asia & Europe at a 1.2 million barrel per day clip over that span…

meanwhile, with the big increase in our distillates production, our supplies of distillate fuels rose for the 4th time in 12 weeks, increasing by 4,572,000 barrels to 129,372,000 barrels during the week ending May 31st, after our distillates supplies had decreased by 1,615,000 barrels over the prior week….our distillates supplies reversed & rose this week because the amount of distillates supplied to US markets, a proxy for our domestic demand, fell by 895,000 barrels per day to a 5 month low of 3,387,000 barrels per day, while our imports of distillates fell by 65,000 barrels per day to 112,000 barrels per day, and while our exports of distillates rose by 168,000 barrels per day to 1,476,000 barrels per day….after this week’s inventory ​increase, our distillate supplies were 10.8% higher than the 116,794,000 barrels of distillate that we had stored on June 1st, 2018, even as they were still 3% below the five year average of distillates stocks for this time of the year…

finally, with much higher oil imports and record oil production, our commercial supplies of crude oil in storage increased for the fourteenth time in 20 weeks, rising by 6,671,000 barrels, from 476,493,000 barrels on May 24th to 483,264,000 barrels on May 31st…with that increase, our crude oil inventories rose to 6% above the recent five-year average of crude oil supplies for this time of year, and were well more than 35% higher than the prior 5 year (2009 – 2013) average of crude oil stocks as of the end of May, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…since our crude oil inventories have generally been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of May 31st were 10.7% above the 436,584,000 barrels of oil we had stored on June 1st, of 2018, but at the same time still 5.8% below the 513,207,000 barrels of oil that we had in storage on June 2nd of 2017, and 3.7% below the 501,844,000 barrels of oil we had stored on June 3rd of 2016…  

with that large increase in our crude oil supplies, combined with similar larger than normal increases in supplies of the products made from oil, it turns out that this week saw the largest increase in oil & oil product inventories on record, as you can see in the graph below…

June 7 2019 total oil & products inventory as of May 31

the above graph was taken from a Zero Hedge post titled Oil Crashes Into Bear Market After Biggest Stock Build In 30 Years and it shows the weekly change in millions of barrels in the amount of oil & oil products in storage in the US from 1990 to the current week, which is the extent of the EIA’s records on this metric….over that period, the weeks when total inventories increased are represented by a line above the horizontal zero axis, whereas the weeks when total inventories decreased are represented by a line pointing down from the zero line…in the upper right corner, they have marked the​ total​ increase for this week at 22.4 million barrels, and then have extended a green dashed line back from that ​marker ​across the length of the graph to illustrate that no prior week had such a large increase…in addition to the 6,671,000 barrel increase in oil inventories, the 3,205,000 barrel increase in gasoline inventories, and the 4,572,000 barrel increase in distillate inventories we have covered today, the past week also saw a 2.5 million barrel increase in propane/propylene inventories, a 4.6 million barrel increase in inventories of ‘other oils’, which includes asphalt, road oil, kerosene, and unfinished oil, and modest increases in inventories of jet fuel, residual fuel oil and other minor products to get to the record inventory increase you see graphed above…

This Week’s Rig Count

the US rig count fell for the 14th time in sixteen weeks this past week and in so doing fell to a 16 month low, equaling the rig count of early February 2018….Baker Hughes reported that the total count of rotary rigs running in the US decreased by 9 rigs to 975 rigs over the week ending June 7th, which was also down by 87 rigs from the 1062 rigs that were in use as of the June 8th report of 2018, and quite a bit below the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market…

the count of rigs drilling for oil fell by 11 rigs to 789 rigs this week, which was also a 16 month low, 73 fewer oil rigs than were running a year ago, and less than half of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014…at the same time, the number of drilling rigs targeting natural gas bearing formations rose by 2 rigs to 186 natural gas rigs, which was still down by 12 rigs from the 198 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008…

the rig count in the Gulf of Mexico was unchanged at 23 rigs this week, with 2 rigs deployed offshore from Texas and 21 rigs running offshore from Louisiana, which was a decrease of 1 rig for Texas offshore and an increase of 1 rig for Louisiana offshore….those totals are still an increase from the 19 rigs that were deployed in the Gulf in the same week a year ago, when 18 rigs were drilling in Louisiana waters and one was offshore from Texas, and up from the national total of 20 offshore rigs a year ago, when ​there was also ​a rig ​deployed in the waters offshore from Alaska at the time…

the count of active horizontal drilling rigs was down by 7 to 855 horizontal rigs this week, which was a 15 month low for horizontal drilling and 79 fewer horizontal rigs running this week than the 934 horizontal rigs that were in use in the US on June 8th of last year, and also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the vertical rig count was down by 6 rigs to 46 vertical rigs this week, which was also down from the 66 vertical rigs that that were operating during the same week of last year… on the other hand, the directional rig count was up by 4 rigs to 74 directional rigs this week, and those were up by 7 rigs from the 67 directional rigs that were in use on June 8th of 2018… 

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of June 7th, the second column shows the change in the number of working rigs between last week’s count (May 31st) and this week’s (June 7th) count, the third column shows last week’s May 31st active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 8th of June, 2018…  

June 7 2019 rig count summary

as you can see, the largest decreases this week were in Texas, and specifically in the Permian basin in the western part of the state….of those, four rigs were shut down in Texas Oil District 8, which would be the core Permian Delaware, while single rigs were also idled in Texas Oil District 8A, or the northern Permian Midland basin, and in Texas Oil District 7C, or the southern Permian Midland basin…the other Texas decrease came out of the Eagle Ford shale in the southeast part of the state, as two Eagle Ford oil rigs were shut down, leaving 66, while an 8th rig targeting natural gas in the Eagle Ford was started up at the same time, which shows up as a decrease of two rigs in Texas Oil District 1 and a single rig increase in Texas Oil District 2…​.​two natural gas rigs were also added in Texas Oil District 10, the panhandle’s Granite Wash, where an oil rig was shut down at the same time, leaving the Granite Wash with 5 oil rigs and 3 targeting natural gas….elsewhere, two more natural gas rigs were added in northern Louisiana’s Haynesville shale, while another natural gas rig started up in an “other” basin not tracked separately by Baker Hughes…at the same time, 3 natural gas rigs were shut down in the Marcellus, one in West Virginia and two in Pennsylvania, and another natural gas rig was idled in the Niobrara chalk of the Rockies front range, which is now back to being all oil rigs…meanwhile, other than the changes in major producing states shown above, Alabama drillers also added a rig this week and now are running three, the most in the state since July 14th of last year, while the only rig deployed in Florida was pulled out, leaving Florida with none, par for the course in the state over the last four years…

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May’s job report; April’s trade deficit, construction spending, factory inventories, wholesale sales, et al

With the first Friday of June, the Employment Situation Summary for May from the Bureau of Labor Statistics was the key report released this past week; other major monthly government issued reports released during the week included the Commerce Dept’s report on our International Trade in Goods and Services for Aprilthe April report on Construction Spending (pdf), the Full Report on Manufacturers’ Shipments, Inventories and Orders for April and the April report on Wholesale Trade, Sales and Inventories, all from the Census Bureau…in addition, this week also saw the Consumer Credit Report for April from the Fed, which showed that overall consumer credit, a measure of non-real estate personal debt, expanded by a seasonally adjusted $17.5 billion, or at a 5.2% annual rate, as non-revolving credit expanded at a 4.2% rate to $3,005.4 billion and revolving credit outstanding rose at a 7.9% rate to $1,064.5 billion…

Privately issued reports released this week included the ADP Employment Report for May and the light vehicle sales report for May from Wards Automotive, which estimated that vehicles sold at a 17.31 million annual rate in May, up from the 16.43 million annual rate of sales in April, and up from the 16.81 million annual rate in May a year ago, and the Mortgage Monitor for April (pdf) from Black Knight Financial Services, which indicated that 3.47% of mortgages were delinquent in April, down from 3.65% delinquent in March, and down from the 3.67% delinquency rate in April 2018, and that 0.50% of mortgages remained in the foreclosure process in April, down from 0.51% of all mortgages in March and down from 0.61% a year ago….

In addition, the week saw both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the May Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 52.1% in May, down from 52.8% in April, which suggests quite sluggish expansion in manufacturing firms nationally, and the May Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 56.9%, up from 55.5% in April, indicating a somewhat larger plurality of service industry purchasing managers reported expansion in various facets of their business in April…both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally…

Employers Add 75,000 Jobs in May After Job Additions of Prior Months Revised 75,000 Lower

The Employment Situation Summary for May indicated anemic payroll job growth, while the employment rate, the unemployment rate, & the labor force participation rate were all unchanged…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 75,000 jobs in May, after the previously estimated payroll job increase for March was revised down from 189,000 to 153,000, while the payroll jobs increase for April was revised down from 263,000 to 224,000…with those revisions, that means that there was no net change in the number of seasonally adjusted payroll jobs from the number that was reported last month…the unadjusted data shows that there were actually 687,000 more payroll jobs extant in May than in April, as typical seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were reduced to a normal level by the seasonal adjustments…

Seasonally adjusted job increases were largely concentrated in the private service sector, as private goods producing sectors saw little employment increase and net jobs in various branches of government fell by 15,000….the broad professional and business services sector added 33,000 jobs, as 8,400 found employment with computer systems design and related services and 7,900 jobs were added by employment services…the health care and social assistance sector saw an increase of 24,000 jobs, with 7,000 of those in individual and family services and 7,900 more in doctor’s offices…in addition, the leisure and hospitality sector added 26,000 more jobs than their usual May increase, with the addition of 16,900 more jobs in bars and restaurants…otherwise, the other major employment sectors, including mining, manufacturing, construction, wholesale trade, retail trade, transportation and warehousing, utilities, information, financial activities, and private education, all saw statistically insignificant changes in payroll employment over the month…

The establishment survey also showed that average hourly pay for all employees rose by 6 cents an hour to $27.83 an hour in May, after it had increased by 6 cents an hour in April; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $23.38 an hour….employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in May, while hours for production and non-supervisory personnel was down a tenth of an hour at 33.6 hours…meanwhile, the manufacturing workweek was unchanged at 40.6 hours, while average factory overtime was unchanged at 3.4 hours…

At the same time, the seasonally adjusted extrapolation from the May household survey estimated indicated that the number of those who were employed rose an estimated 113,000 to 156,758,000, while the similarly estimated number of those who were unemployed rose by 64,000 to 5,888,000; which thus meant a rounded increase of 176,000 in the total labor force…since the working age population had grown by 168,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 8,000 to 96,215,000….meanwhile, the increase of those in the labor force as a percentage of the increasing working population was not enough to change the labor force participation rate, which remained at 62.8%….likewise, the smallish increase in number employed vis a vis the increase in the population was not enough to change the employment to population ratio, which we could think of as an employment rate, as it remained at 60.6%…in addition, the increase in the number counted as unemployed was not large enough to change the unemployment rate, which remained at 3.6%….on the other hand, the number who reported they were involuntarily working part time fell by 299,000 to 4,355,000 in May, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 7.3% in April to 7.1% in May, the lowest since December 2000

A few caveats on this month;s report are in order: April temperatures were well above normal nationally, so some construction & other spring work got an earlier than normal start…on the other hand, May saw half the country blown away or flooded out, as it was the 2nd wettest May on record, with US temperatures in the bottom third of the historical average…those factors do not show up in the seasonal adjusted jobs data, which assumes seasonal weather…also remember the establishment survey only counts “non-farm payrolls”, and doesn’t count the hundreds of thousands in the Midwest who are sitting on their hands because the fields are too wet to work…

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

April Trade Deficit Decreases 2.1% After March Trade Deficit Revised 3.8% Higher

our trade deficit decreased by 2.1% in April, after our March trade deficit was revised 3.8% higher, as both imports and exports decreased in April, but imports decreased by a greater amount…the Commerce Dept report on our international trade in goods and services for April indicated that our seasonally adjusted goods and services trade deficit fell by a rounded $1.1 billion to $50.8 billion in April, from a March deficit that was revised from the originally reported $50.0 billion to $51.9 billion, a revision which should result in a downward revision of about 0.14 percentage points to 1st quarter GDP when the third estimate is released at the end of June …in rounded numbers, the value of our April exports fell by $4.6 billion, or 2.2 percent, to $206.8 billion on a $4.4 billion decrease to $136.9 billion in our exports of goods and a $0.2 billion decrease to $69.9 billion in our exports of services, while our imports fell by $5.7 billion, or 2.2 percent, to $257.6 billion on a $5.4 billion decrease to $208.7 billion in our imports of goods and a $0.3 billion decrease to $49.0 billion in our imports of services…export prices averaged 0.2% higher in April, so real exports were smaller than their nominal value by that percentage, while import prices were 0.2% higher, meaning that our real imports were likewise smaller than than their nominal value by that percentage..

The decrease in our April exports of goods came about largely as a result of lower exports of capital goods, of automotive goods, and of consumer goods….referencing the Full Release and Tables for April (pdf), in Exhibit 7 we find that our exports of capital goods fell by $2,723 million to $44,696 million as a $2,296 million decrease in our exports of civilian aircraft, a $221 million decrease in our exports of industrial engines, a $203 million decrease in our exports of electrical apparatuses and a $200 million decrease in our exports of measuring, testing, control instruments was partly offset by a increase of $340 million in exports of civilian aircraft engines, while our exports of automotive vehicles, parts, and engines fell by $752 million to $13,172 million on $438 million lower exports of passenger cars, and a $255 million decrease in our exports of parts and accessories of vehicles other than engines, chassis, and tires…in addition, our exports of consumer goods fell by $562 million to $17,293 million on a $441 million decrease in our exports of pharmaceutical preparations, our exports of industrial supplies and materials fell by $33 million to $44,628 million on a $822 million decrease in our exports of petroleum products other than fuel oil, which was offset by a $835 million increase in our exports of fuel oil, a $835 million increase in our exports of crude oil, a $835 million increase in our exports of natural gas liquids, while our exports of other goods not categorized by end use fell by $529 million to $5,076 million….meanwhile, our exports of foods, feeds and beverages rose by $109 million to $11,208 million on higher exports of wheat, corn, and animal feeds in the only export category to see an increase…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and indicates that lower imports of all categories of goods contributed to the April decrease in our imports…our imports of capital goods fell by $1,739 million to $55,617 million on a $871 million decrease in our imports of semiconductors, a $399 million decrease in our imports of civilian aircraft engines, and a $295 million decrease in our imports of computer accessories, and our imports of consumer goods fell by $1,099 million to $54,295 million on a $666 million decrease in our imports of gem diamonds, a $403 million decrease in our imports of cellphones, and a $304 million decrease in our imports of cotton apparel and household goods…in addition, our imports of automotive vehicles, parts and engines fell by $981 million to $30,907 million on a $601 million decrease in our imports of new and used passenger cars and a $281 million decrease in our imports of parts and accessories of vehicles other than engines, chassis, and tires, and our imports of industrial supplies and materials fell by $612 million to $44,568 million on a $703 million decrease in our imports of organic chemicals, and a $353 million increase in our imports of natural gas, which was partially offset by a $414 million increase in our imports fuel oil…meanwhile, our imports of foods, feeds, and beverages fell by $142 million to $12,845 million and our imports of other goods not categorized by end use fell by $807 million to $8,756 million…

The Full Release and Tables pdf for this report also gives us surplus and deficit details on our goods trade with selected countries:

The April figures show surpluses, in billions of dollars, with South and Central America ($4.2), Hong Kong ($2.4), Brazil ($0.9), and Singapore ($0.6). Deficits were recorded, in billions of dollars, with China ($29.4), European Union ($15.1), Mexico ($7.9), Japan ($6.5), Germany ($5.4), Italy ($3.1), Taiwan ($2.0), France ($2.0), Canada ($1.8), South Korea ($1.5), India ($1.3), United Kingdom ($0.4), Saudi Arabia ($0.2), and OPEC (less than $0.1).

  • • The deficit with the European Union decreased $1.0 billion to $15.1 billion in April. Exports decreased $0.4 billion to $27.0 billion and imports decreased $1.4 billion to $42.1 billion.
  • • The deficit with Canada decreased $0.9 billion to $1.8 billion in April. Exports decreased $0.4 billion to $24.6 billion and imports decreased $1.3 billion to $26.4 billion.
  • • The deficit with China increased $2.1 billion to $29.4 billion in April. Exports decreased $1.8 billion to $8.5 billion and imports increased $0.3 billion to $37.9 billion.

to gauge the impact of April’s trade on 2nd quarter growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2012 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that they are not annualized in the table here…from this table, we can figure that 1st quarter real exports of goods averaged 150,609 million monthly in 2012 dollars, while inflation adjusted April exports were at 145,993 million in that same 2012 dollar quantity index representation… annualizing the change between those two figures, we find that April’s real exports of goods were falling at a 11.7% annual rate from those of the 1st quarter, or at a pace that would subtract about 0.91 percentage points from 2nd quarter GDP if it were continued through May and June…..from that same table, we can figure that our 1st quarter real imports averaged 233,326.3 million monthly in chained 2012 dollars, while inflation adjusted April imports were at 227,905 million in that same 2012 dollar representation…that would indicate that so far in the 2nd quarter, our real imports have decreased at a 9.0% annual rate from those of the 1st quarter…since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 9.0% rate would conversely add 1.13  percentage points to 2nd quarter GDP….hence, if the April trade deficit is maintained at the same level throughout the 2nd quarter, our improving balance of trade in goods would add about 0.22 percentage points to the growth of 2nd quarter GDP….note that we have not estimated the impact of the less volatile change in services here because the Census does not provide handy inflation adjusted data on those, and we don’t have easy access to the details on their price changes..

Construction Spending Little Changed in April; Real Construction Down at a 5.2% Rate from Q1

The Census Bureau’s report on construction spending for April (pdf) estimated that the month’s seasonally adjusted construction spending was at a $1,298.5 billion annual rate during the month, statistically unchanged (±1.3 percent)* from the revised March annualized rate of $1,299.2 billion, but 1.2 percent (±1.5 percent)* below the estimated annualized level of construction spending in April of last year…the annualized March construction spending estimate was revised 1.3% higher, from $1,282.2 billion to $1,299.2 billion, while the annual rate of construction spending for February was revised 0.7% lower, from $1,306.4 billion to $1,297.8 billion…taken together, those revisions would suggest an upward revision of around 0.21 percentage points to 1st quarter GDP when the third estimate is released at the end of June…

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 $954.0 billion, 1.7 percent (±1.0 percent) below the revised March estimate of $970.4 billion. Residential construction was at a seasonally adjusted annual rate of $499.3 billion in April, 0.6 percent (±1.3 percent)* below the revised March estimate of $502.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $454.7 billion in April, 2.9 percent (±1.0 percent) below the revised March estimate of $468.0 billion.
  • Public Construction: In April, the estimated seasonally adjusted annual rate of public construction spending was $344.6 billion, 4.8 percent (±2.5 percent) above the revised March estimate of $328.7 billion. Educational construction was at a seasonally adjusted annual rate of $80.0 billion, 2.1 percent (±2.6 percent)* above the revised March estimate of $78.3 billion. Highway construction was at a seasonally adjusted annual rate of $114.3 billion, 6.8 percent (±8.6 percent)* above the revised March estimate of $107.0 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 as government investment outlays, for both state and local and Federal governments…however, getting an accurate read on the impact of April’s construction spending reported in this release on 2nd quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…there are many different price indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf) that are used by the BEA to make those inflation adjustments, so in lieu of trying to adjust for price changes for all of those types of construction separately, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an estimate…that index showed that aggregate construction costs were up 1.6% from March to April, up 0.2% from February to March but down 0.1% from January to February….

On that basis, we can estimate that April construction costs were roughly 1.8% greater than those of February and 1.7% greater than those of January, and obviously 1.6% greater than those of March…we then use those percentages to inflate spending for each of those three months, which is arithmetically the same as deflating April construction spending against the first quarter, for comparison purposes…construction spending in millions of dollars for the first quarter is given as 1,299,161 for March, 1,297,819 for February, and 1,284,654 for January…thus to find the difference between April’s inflation adjusted construction spending and the adjusted construction spending of the first quarter, our formula becomes: 1,298,547 / (( 1,299,161 * 1.016 + 1,297,819 * 1.018 + 1,284,654 * 1.017) / 3) = 0.98683, meaning real construction spending in April was actually down roughly 1.3% vis a vis the 1st quarter, or down at a 5.16% annual rate….to figure the potential effect of that change on 2nd quarter GDP,  we take the annualized difference between the first quarter average inflation adjusted construction spending and April’s adjusted spending as a fraction of the real annualized 1st quarter GDP figure, and thus can estimate that real April construction spending was falling at a rate that would subtract about 0.42 percentage points from the growth of 2nd quarter GDP…

Factory Shipments Down 0.5% in April, Factory Inventories Up 0.3%

The April Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $4.0 billion or 0.8 percent to $499.3 billion in April, following an increase of 1.3% to $503.3 billion in March, which was revised from the 1.9% increase to $508.2 billion reported last month….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only useful as a revised update to the April advance report on durable goods we reported on two weeks ago…on those revisions, the Census Bureau’s summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we’ll just quote directly from that here:

  • Summary: New orders for manufactured goods in April, down two of the last three months, decreased $4.0 billion or 0.8 percent to $499.3 billion, the U.S. Census Bureau reported today.  This followed a 1.3 percent March increase.  Shipments, down following two consecutive monthly increases, decreased $2.7 billion or 0.5 percent to $504.1 billion.  This followed a 0.2 percent March increase.  Unfilled orders, down two of the last three months, decreased $0.6 billion or 0.1 percent to $1,179.3 billion.  This followed a 0.1 percent March increase.  The unfilled orders‐to‐shipments ratio was 6.69, up from 6.61 in March.  Inventories, up seven of the last eight months, increased $1.8 billion or 0.3 percent to $692.9 billion.  This followed a 0.4 percent March increase.  The inventories‐to‐shipments ratio was 1.37, up from 1.36 in March.
  • New orders for manufactured durable goods in April, down two of the last three months, decreased $5.2 billion or 2.1 percent to $248.6 billion, unchanged from the previously published decrease.  This followed a 1.7 percent March increase.  Transportation equipment, also down two of the last three months, drove the decrease, $5.3 billion or 5.9 percent to $85.5 billion.  New orders for manufactured nondurable goods increased $1.2 billion or 0.5 percent to $250.7 billion.
  • Shipments of manufactured durable goods in April, down three of the last four months, decreased $3.9 billion or 1.5 percent to $253.4 billion, up from the previously published 1.6 percent decrease.  This followed a 0.5 percent March decrease.  Transportation equipment, down four consecutive months, led the decrease, $3.7 billion or 4.1 percent to $85.9 billion.  Shipments of manufactured nondurable goods, up three consecutive months, increased $1.2 billion or 0.5 percent to $250.7 billion.  This followed a 0.9 percent March increase.  Petroleum and coal products, also up three consecutive months, led the increase, $1.1 billion or 2.0 percent to $56.2 billion.
  • Unfilled orders for manufactured durable goods in April, down two of the last three months, decreased $0.6 billion or 0.1 percent to $1,179.3 billion, unchanged from the previously published decrease.  This followed a 0.1 percent March increase.  Transportation equipment, also down two of the last three months, led the decrease, $0.4 billion or virtually unchanged to $810.7 billion. 
  • Inventories of manufactured durable goods in April, up nine of the last ten months, increased $1.7 billion or 0.4 percent to $422.4 billion, unchanged from the previously published increase.  This followed a 0.3 percent March increase.  Transportation equipment, also up nine of the last ten months, led the increase, $1.5 billion or 1.1 percent to $136.1 billion.   Inventories of manufactured nondurable goods, up four consecutive months, increased $0.2 billion or 0.1 percent to $270.5 billion.  This followed a 0.5 percent March increase.  Petroleum and coal products, also up four consecutive months, drove the increase, $0.5 billion or 1.3 percent to $42.2 billion.  By stage of fabrication, April materials and supplies increased 0.1 percent in durable goods and decreased 0.2 percent in nondurable goods.  Work in process increased 0.9 percent in durable goods and was virtually unchanged in nondurable goods.  Finished goods were virtually unchanged in durable goods and increased 0.3 percent in nondurable goods. 

To estimate the effect of those April factory inventories on 2nd 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 rose by 0.2% to $241,338 million; the value of work in process inventories rose 0.7% to $213,239 million, and the value of materials and supplies inventories was little changed at $238,372 million…the April producer price index reported that prices for finished goods were on average 0.3% higher, that prices for intermediate processed goods were on average 0.1% lower, while prices for unprocessed goods were 2.7% higher….assuming similar valuations for like types of inventories, that would suggest that April’s real finished goods inventories were about 0.1% smaller, that real inventories of intermediate processed goods were roughly 0.8% greater, and real raw material inventory inventories were about 2.7% lower, with a caveat on the later that the entire raw material price increase in April was in food & energy goods; core raw materials prices were down 1.2%….still, since real NIPA factory inventories were somewhat larger in the 1st quarter, and this report seems to indicate a modest decrease in April’s real inventories, it appears that the real change in April factory inventories will have a noticeable negative impact on the growth rate of 2nd quarter GDP…

April Wholesale Sales Down 0.4%, Wholesale Inventories Up 0.8%

The April report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $503.1 billion, down 0.4 percent (+/-0.5%) from the revised March level, but up 2.7 percent (±0.7 percent) from wholesale sales of April 2016… the March preliminary sales estimate was revised from the $507.4 billion reported last month to $505,145 million, which meant the February to March percent change was revised from the preliminary estimate of an increase of 2.3 percent (±0.5 percent) to an increase of 1.8 percent (±0.5 percent)….as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold….

On the other hand, the monthly change in private inventories is a major factor in GDP, as any goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this April report estimated that wholesale inventories were valued at a seasonally adjusted $675.5 billion at month end, an increase of 0.8 percent (+/-0.4%) from the revised March level and 7.6 percent (±1.2 percent) higher than in April a year ago, with the March preliminary estimate revised from $669.9 billion to $670.1 billion at the same time, now statistically unchanged from February….

That small upward revision to March wholesale inventories is not likely to have a statistical impact on the coming 1st quarter GDP revision…meanwhile, April wholesale inventories, after an adjustment for price changes for each category of wholesale goods as indicated by the components of the April producer price index, appears to indicate a modest real wholesale inventory increase heading into the 2nd quarter, which still might fall short of the $10.7 billion increase in real wholesale inventories that was indicated by the key source data and assumptions (xls) in the second estimate of 1st quarter GDP…

 

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

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tables and graphs for June 8th

rig count summary:

June 7 2019 rig count summary

natural gas prices:

June 8 2019 natural gas prices

total oil & oil products inventory change:

June 7 2019 total oil & products inventory as of May 31

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oil price drop of 16% in May tests exploitation companies’ profitability…

oil prices dropped nearly 9% this week as an already falling market sold off on Friday after Trump threatened new tariffs on Mexico in retaliation for their lax control of immigration, raising fears of further trade turmoil… after falling more than 6% to $58.63 a barrel last week on a worsening impasse in the US-China trade war, the benchmark price of US crude for July delivery steadied in overseas and off-market trading on Memorial Day and then moved higher on Tuesday, gaining 51 cents to $59.14 a barrel, even as oil traders remained caught between concerns over global supply and fears that the U.S.-Chinese trade conflict would hurt demand…the trade war fears moved to the forefront of concerns on Wednesday and oil prices fell more than 2% after China signaled it might restrict rare earths sales to the US, but perked up near the close after the American Petroleum Institute (API) reported a large draw in crude oil inventory, with oil ending the session just 33 cents lower at $58.81 a barrel…however, prices fell almost 4% to a two month low on Thursday after the EIA failed to confirm the API inventory draw and trade war fears returned, with the benchmark US price closing $2.22 lower at $56.59 a barrel…oil prices then plunged unimpeded on Friday after Trump stoked trade fears by threatening tariffs on Mexico and ended $3.09 or 5.5% lower at $53.30 a barrel, the lowest close since February 12th…oil prices thus ended 8.7% lower for the week and finished May more than 16% lower in their first monthly loss of the year

with oil prices suddenly in free fall, it seems it would be an appropriate time for us to check what levels of oil prices are needed for oil producing companies to cover their expenses, and what levels of oil prices the exploitation companies need to drill a new well…every quarter the Dallas Fed conducts a survey of more than 200 oil and gas companies headquartered in or operating in their district, which forms the basis of their economic research on the oil & gas industry, and which also includes a set of different questions each quarter…in addition to the usual quarterly survey, the First Quarter Dallas Fed Energy Survey included a set of special questions to update to their data on breakeven oil prices by basin….160 oil and gas firms responded to the special questions survey, and in an overview, they present the results of that survey graphically, and that’s what we’ll look at today…

as the heading on this first graphic indicates, the first special question the Dallas Fed asked the oil executives was what WTI oil price they needed to cover their expenses on existing wells, and the range of their responses are indicated in a bar graph format below…

May 2019 operating expenses breakeven via Dallas Fed

in the above graph, the blue, brick, yellow, orange, green, purple, and turquoise colored bars represent the range of oil price responses to that operating expenses question given by oil company executives with operations in the Permian Midland shale of western Texas, the Eagle Ford of south Texas, other US oil producing shale basins outside of those graphed, the SCOOP/STACK of Oklahoma, the Permian Delaware of far west Texas and New Mexico, other non-shale oil producing areas, and other Permian shale wells respectively, as the headings above the colored bars indicate…in addition, under each of those bars, they’ve indicated the number of oil executives that responded to that headline question for each of those basins or collectives…thus, what the first blue bar tells us is that for 19 oil company executives with wells in the Permian Midland shale, at least one company needs oil priced at $45 a barrel to cover its operating expenses, at least one oil company could cover their Midland basin expenses at $9 a barrel oil, and the average price needed to cover operating expenses for all oil companies producing oil in that basin is $27 a barrel…similarly, in the brick colored bar, we can see that at least one oil company with wells in the Eagle Ford can cover it’s expenses with oil at $6 a barrel, while another company needs as much as $55 a barrel to cover their operating expenses in the same basin, while the average oil price the 11 companies with wells in the Eagle Ford needs is $28 a barrel…meanwhile, the yellow bar indicates responses from companies operating in ‘other’ shale basins, presumably such as the Bakken of North Dakota and the Niobrara chalk of the Rockies front range; it appears a company operating in one of those basins can meet their expenses with $5 a barrel oil, while the average prices needed to cover expenses by the 11 companies surveyed is again $28 a barrel, again with at least one company needing as much as $50 oil to cover their expenses in that basin… 

as we can also see in the other bars on that graph, there is at least one company operating in the Permian Delaware who needs $60 oil to cover their expenses, while there is also at least one company operating in another part of the Permian who needs $65 a barrel oil to cover their operating expenses…hence, with this week’s WTI oil price closing at $53.50 a barrel, those companies are losing money with every barrel of oil they produce…

next we have a similar graphic showing what oil price each of the survey respondents said they needed to profitably drill a new well:

May 2019 well drilling breakeven via Dallas Fed copy 2

like the first graphic, the colored bars in this 2nd graphic outline the range of responses to the Dallas Fed question as to what oil price each of the executives says they need to profitably drill a new well, with the basin bars arranged left to right from the lowest average oil price to the highest, ie, in a slightly different order than for the operating expenses question…hence, we can see that among the 17 oil executives with operations in the Permian Midland shale who answered this question, at least one can drill a new well and make a profit with $23 oil, while at least one other company needs $65 oil to cover his costs of drilling a new well, while the average oil price needed to turn a profit for all those operating in the Permian Midland taking part in the survey was $47 a barrel…similarly, for the 13 oil execs who might be drilling new wells in one of the other shale basins outside of those graphed (yellow), responses ranged from those who could profit with oil price of $35 a barrel to those who need a price of $60 a barrel, with the average response for those drilling in those basins at $49 a barrel…drillers in the Permian Delaware (green) and in non shale areas (purple) also need an average of $49 a barrel to profitably drill, but we can see the range of answers for the 13 companies in the Permian Delaware is much narrower ($40 to $65) than for the 45 responders operating in non-shale areas, where the profitability threshold for new wells ranges from $20 to $75 a barrel oil…average breakeven prices for new drilling are higher still in the Eagle Ford and Oklahoma’s SCOOP/STACK, but notice that even on the far right of the graphic, where other Permian wells have the highest average for profitability at $54 a barrel, above Friday’s closing price, there are still drillers who say they can profit with $40 oil, even as some need as much as $70 a barrel to turn a profit….

so the major takeaway from this survey is that there is no single breakeven price, or even a narrow price range, either for operating existing wells, or for drilling new ones, and hence almost every move in the price of oil has the potential to impact the decisions being made in any basin across the US…however, the decisions to drill or not are not made on a daily or weekly basis; oil companies will usually set their budget once a quarter or once a half year, and most will enter into a futures contract to sell all or part of their expected production at a given price well in advance of heading out to the oil patch…still, for those who are not fully hedged and who’s breakeven price is in the upper half of the range we see here, a price move like we’ve seen over the past month might be enough to provide the impetus to cancel or delay a project that they had planned…

meanwhile, natural gas prices also fell this week, albeit not as sharply as those of oil, as demand for air conditioning failed materialize to the degree anticipated and a larger increase of natural gas in storage than traders expected sent prices tumbling…after falling 3.3 cents to $2.598 per mmBTU last week, the contract for June natural gas increased 3.5 cents over Tuesday and Wednesday to finish trading at $2.633 per mmBTU…meanwhile, natural gas for July delivery, which had ended last week at $2.611 per mmBTU, rose just 1.3 cents over those first two days of trading this week before falling 7.7 cents on Thursday and 9.3 cents on Friday to end the week 6% lower at $2.454 per mmBTU…

the natural gas storage report from the EIA for the week ending May 24th indicated that the quantity of natural gas held in storage in the US increased by 114 billion cubic feet to 1,867 billion cubic feet by the end of the week, which meant our gas supplies were 156 billion cubic feet, or 9.1% more than the 1,711 billion cubic feet that were in storage on May 25th of last year, while still 257 billion cubic feet, or 12.1% below the five-year average of 2,124 billion cubic feet of natural gas that have typically been in storage as of the fourth weekend in May in recent years….this week’s 114 billion cubic feet injection into US natural gas storage was well above the median forecast for a 98 billion cubic foot increase in supplies in surveys by Bloomberg and Natural Gas Intelligence, and likewise higher than the average 97 billion cubic feet of natural gas that have been added to gas storage during the same week of May in recent years….moreover, the 760 billion cubic feet of natural gas that were added to storage over the past 9 weeks has been the largest injection of gas into storage on record for any similar period this early in the injection season; injections for the same 9 weeks over most recent years aren’t even close…

The Latest US Oil Supply and Disposition Data from the EIA

this week’s US oil data from the US Energy Information Administration, reporting on the week ending May 24th, showed that an increase in our oil exports and an increase refinery throughput meant that we needed to pull oil out of commercial crude storage for the third time in ten weeks…our imports of crude oil fell by an average of 81,000 barrels per day to an average of 6,862,000 barrels per day, after falling by an average of 669,000 barrels per day over the prior week, while our exports of crude oil rose by an average of 395,000 barrels per day to 3,317,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 3,545,000 barrels of per day during the week ending May 24th, 476,000 fewer barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was reported to be 100,000 barrels per day higher at a record 12,300,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from well production totaled an average of 15,845,000 barrels per day during this reporting week…

meanwhile, US oil refineries were using 16,767,000 barrels of crude per day during the week ending May 24th, 189,000 more barrels per day than the amount of oil they used during the prior week, while over the same period the EIA reported that a net of 41,000 barrels of oil per day were being pulled out of the oil that’s in storage in the US….hence, it’s pretty obvious that this week’s crude oil figures from the EIA seems to indicate that our total working supply of oil from net imports, from oilfield production and from storage was 881,000 barrels per day short of what the oil refineries reported they used during the week…to account for that disparity between the supply of oil and the disposition of it, the EIA inserted a (+881,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that they label in their footnotes as “unaccounted for crude oil”….with that much oil unaccounted for, we have to figure one or more of this week’s crude oil metrics are off by a statistically significant amount…(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….  

further details from the weekly Petroleum Status Report (pdf) indicated that the 4 week average of our oil imports fell to an average of 7,028,000 barrels per day last week, 8.5% less than the 7,679,000 barrel per day average that we were importing over the same four-week period last year…the 41,000 barrel per day decrease in our total crude inventories all pulled out of our commercially available stocks of crude oil, as the amount of oil stored in our Strategic Petroleum Reserve was unchanged…this week’s crude oil production was reported to be 100,000 barrels per day higher at a record 12,300,000 barrels per day because the rounded estimate of the output from wells in the lower 48 states was 100,000 barrels per day higher at a record 11,800,000 barrels per day, while a 3,000 barrel per day decrease to 474,000 barrels per day in Alaska’s oil production was not enough to impact the final rounded national total…last year’s US crude oil production for the week ending May 25th was at 10,769,000 barrels per day, so this reporting week’s rounded oil production figure was 14.2% above that of a year ago, and 45.9% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…    

meanwhile, US oil refineries were operating at ​91.2% of their capacity in using 16,767,000 barrels of crude per day during the week ending May ​24th, up from 89.9% of capacity the prior week, but still a bit below the recent historical refinery utilization rate for this time of year….likewise, the 16,767,000 barrels per day of oil that were refined this week were 2.3% below the 17,155,000 barrels of crude per day that were being processed during the week ending May 25th, 2018, when US refineries were operating at 93.9% of capacity… 

even with the increase in the amount of oil being refined, gasoline output from our refineries was a bit lower, decreasing by 20,000 barrels per day to 9,863,000 barrels per day during the week ending May 24th, after our refineries’ gasoline output had decreased by 29,000 barrels per day the prior week….with that decrease in gasoline output, this week’s gasoline production was 5.5% below than the 10,433,000 barrels of gasoline that were being produced daily during the same week last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) slipped by 24,000 barrels per day to 5,182,000 barrels per day, after our distillates output had decreased by 58,000 barrels per day the prior week…with this week’s decrease, the week’s distillates production was 2.2% less than the 5,296,000 barrels of distillates per day that were being produced during the week ending May 25th, 2018…. 

despite the decrease in our gasoline production, our supply of gasoline in storage at the end of the week rose for the third time in 15 weeks, increasing by 2,204,000 barrels to 230,944,000 barrels over the week to May 24th, after our gasoline supplies had increased by 3,716,000 barrels over the prior week….our gasoline supplies rose by less this week than last because our imports of gasoline fell by 263,000 barrels per day to 1,087,000 barrels per day, and because our exports of gasoline rose by 301,000 barrels per day to 717,000 barrels per day, while the amount of gasoline supplied to US markets decreased by 35,000 barrels per day to 9,394,000 barrels per day….after having reached an all time record high seventeen weeks ago, our gasoline supplies​ have since fallen 12%​ are still 1.5% lower than last May 25th’s inventory level of 234,431,000 barrels, while they now are back to 1% above the five year average of our gasoline supplies at this time of the year…  

meanwhile, with the modest decrease in our distillates production, our supplies of distillate fuels fell for the 8th time in 11 weeks, decreasing by 1,615,000 barrels to 124,800,000 barrels during the week ending May 24th, after our distillates supplies had increased by 768,000 barrels over the prior week….our distillates supplies fell because the amount of distillates supplied to US markets, a proxy for our domestic demand, rose by 495,000 barrels per day to 4,282.000 barrels per day, while our imports of distillates rose by 75,000 barrels per day to 177,000 barrels per day, and while our exports of distillates fell by 103,000 barrels per day to 1,308,000 barrels per day …even after this week’s inventory decrease, our distillate supplies were still 8.9% higher than the 114,629,000 barrels of distillate that we had stored on May 25th, 2018, even as they are now roughly 5% below the five year average of distillates stocks for this time of the year…

finally, with higher oil exports and an increase in refining, our commercial supplies of crude oil in storage decreased for the sixth time in 19 weeks, slipping by 282,000 barrels from 476,775,000 barrels on May 17th to 476,493,000 barrels on May 24th….even with that decrease, our crude oil inventories ​were 5% above the recent five-year average of crude oil supplies for this time of year, and remained more than 35% higher than the prior 5 year (2009 – 2013) average of crude oil stocks as of the fourth weekend in May, with the disparity between those comparisons arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…since our crude oil inventories have generally been rising since this past Fall, after generally falling until then through most of the prior year and a half, our oil supplies as of May 24th were 9.7% above the 434,512,000 barrels of oil we had stored on May 25th of 2018, but at the same time still 6.6% below the 509,912,000 barrels of oil that we had in storage on May 26th of 2017, and 5.5% below the 504,205,000 barrels of oil we had stored on May 27th of 2016…    

This Week’s Rig Count

the US rig count inched up for just the 2nd time in fifteen weeks this past week, but remained close to a 14 month low….Baker Hughes reported that the total count of rotary rigs running in the US increased by 1 rig to 984 rigs over the week ending May 31st, which was still down by 76 rigs from the 1059 rigs that were in use as of the June 1st report of 2018, and quite a bit below the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC announced their attempt to flood the global oil market…

the count of rigs drilling for oil rose by 3 rigs to 800 rigs this week, which was still 61 fewer oil rigs than were running a year ago, and less than half of the recent high of 1609 rigs that were drilling for oil on October 10th, 2014…at the same time, the number of drilling rigs targeting natural gas bearing formations fell by 2 rigs to 184 natural gas rigs, which was also down by 13 rigs from the 197 natural gas rigs that were drilling a year ago, and way down from the modern era high of 1,606 natural gas targeting rigs that were deployed on August 29th, 2008…

offshore drilling in the Gulf of Mexico increased by 1 rig to 23 rigs this week, as another rig was added offshore from Texas, where there are now 3 rigs deployed, with the other 20 all offshore from Louisiana….that’s up from the 18 rigs that were deployed in the Gulf in the same week a year ago, when 17 rigs were drilling in Louisiana waters and one was offshore from Texas, and up from the national total of 19 rigs offshore a year ago, as a rig was also set up in the waters offshore from Alaska at that time…

the count of active horizontal drilling rigs was down by 1 to 862 horizontal rigs this week, which was another 14 month low for horizontal drilling, with 67 fewer horizontal rigs running this week than the 929 horizontal rigs that were in use in the US on June 1st of last year, which was also well down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…on the other hand, the directional rig count was up by 1 rig to 70 directional rigs this week, and those were up by 5 rigs from the 65 directional rigs that were in use during the same week of last year…at the same time, the vertical rig count was also up by 1 rig to 52 vertical rigs this week, but those were still down from the 66 vertical rigs that that were operating on June 1st of 2018… 

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major oil & gas producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of May 31st, the second column shows the change in the number of working rigs between last week’s count (May 24th) and this week’s (May 31st) count, the third column shows last week’s May 24th active rig count, the 4th column shows the change between the number of rigs running on Friday and the number running before the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was the 1st of June, 2018…      

May 31 2019 rig count summary

the two rigs that were added in New Mexico were both in the Permian Delaware, because the Texas Permian experienced a net loss of 1 rig, with single rigs shut down in Texas Oil District 8, the core Permian Delaware, and in Texas Oil District 7C, or the southern Permian Midland basin, while a rig was added in Texas Oil District 8A, or the northern part of the Permian Midland basin…the Louisiana rig increase was a natural gas rig added in the Haynesville shale in the northwest part of the state, but natural gas drilling ​activity ​still fell by 2 rigs nationally with rig removals in Ohio’s Utica shale, West Virginia’s Marcellus, and the Eagle Ford of southern Texas; ​note that ​the Eagle Ford shows no net change above because a rig drilling for oil was started up at the same time, leaving the current Eagle Ford deployment at 68 oil rigs and 7 natural gas rigs…we should also note that other than in the major producing states above, Mississippi drillers added two rigs last week and are now running four, up from two rigs a year ago, but not an unusual deployment in the state, which has seen as many as six rigs active at times over the past year…

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1st quarter GDP revision; April’s personal income and outlays

The key economic releases of the past week were the second estimate of 1st quarter GDP from the Bureau of Economic Analysis, and the April report on Personal Income and Spending, also from the BEA, which provides 23% of 2nd quarter GDP….in addition, the last two regional Fed manufacturing surveys for May were also released this week: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index inched up to +5 from last month’s +3, still indicating pretty sluggish growth in that region’s manufacturing, while the Dallas Fed released the Texas Manufacturing Outlook Survey, which indicated its general business activity index fell to -5.3 from +2.0 in April, it’s worst reading since 2016 and indicating contraction of the Texas economy….this week also saw the release of the March Case-Shiller Home Price Index, which is a relative average of January, February & March home prices compared to those of previous 3 month periods; the Case Shiller index indicated that home prices nationally for those 3 months averaged 3.7% higher than prices for the same homes that sold during the same 3 month period a year earlier, down from the 4.0% year over year gain reported for the February index a month ago..

1st Quarter GDP Revised to Show Growth at a 3.1% Rate

The Second Estimate of our 1st Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 3.1% rate in the 1st quarter, revised from the 3.2% growth rate reported in the advance estimate last month, as growth of real fixed investment and of inventories were revised lower while growth of real personal consumption expenditures was revised higher and while an upward revision to exports was more than offset by a smaller decrease in imports than had previously been reported….in current dollars, our first quarter GDP grew at a 3.57% annual rate, increasing from what would work out to be a $20,865.1 billion a year output rate in the 4th quarter of last year to a $21,048.8 billion annual rate in the 1st quarter of this year, with the headline 3.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 0.8%, aka the GDP deflator, was computed and applied to the current dollar change…

As we review this month’s revisions, remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change a bit over 4 times of that what 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 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as a quantity indexes 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 the Full Release & Tables for the second estimate of 1st quarter GDP, which is linked to on the BEA’s main GDP page…specifically, we’ll be using table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2012; table 2, which shows the contribution of each of the components to the GDP figures for those months and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP  components; and table 4, which shows the change in the price indexes for each of the GDP components…the full pdf for the 1st quarter advance estimate, which this estimate revises, is here

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 1.2% growth rate reported last month to indicate PCE growth a 1.3% rate with this estimate…that growth figure was arrived at by deflating the 1.7% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation grew at a 0.4% annual rate in the 1st quarter, which was revised from the 0.6% PCE inflation rate published a month ago…real consumption of durable goods fell at a 4.6% annual rate, which was revised from the 5.3% drop shown in the advance report, and subtracted 0.33 percentage points from GDP, as a drop in real consumption of automobiles at a 15.9% rate more than offset a modest increase in real consumption of recreational goods and vehicles…..real consumption of nondurable goods by individuals rose at a 2.0% annual rate, revised from the 1.7% increase reported in the 1st estimate, and added 0.27 percentage points to 1st quarter economic growth, with decreased real consumption of food and clothing more than offset by greater growth in real consumption of other nondurables except for energy, which was unchanged….at the same time, consumption of services rose at a 2.1% annual rate, revised from the 2.0% growth rate reported last month, and added 0.96 percentage points to the final GDP tally, led by real growth of health care and financial services…

At the same time, seasonally adjusted real gross private domestic investment grew at a 4.3% annual rate in the 1st quarter, revised from its 5.1% growth estimate reported last month, as real private fixed investment grew at a 1.0% rate, rather than at the 1.5% rate reported in the advance estimate, while inventory growth was somewhat less than had been previously estimated…real investment in non-residential structures was revised from shrinking at a 0.7% rate to growth at a 0.8% rate, while real investment in equipment was revised to show it contracted at a 1.0% rate, a reversal of the 0.2% growth rate previously reported…at the same time, the quarter’s investment in intellectual property products was revised from real growth at a 8.6% rate to real growth at a 7.2% rate…the contraction in real residential investment was also revised downward, from shrinking at a 2.8% annual rate to shrinking at a 3.5% rate…after those revisions, the increase in investment in non-residential structures added 0.05 percentage points to the 1st quarter’s growth rate, the decrease in investment in equipment subtracted 0.06 percentage points from the quarter’s growth, the increase in investment in intellectual property added 0.32 percentage points, while the contraction in residential investment subtracted 0.13 percentage points from the increase in 1st quarter GDP…

Meanwhile, the growth in real private inventories was revised from the originally reported $128.4 billion in inflation adjusted dollars to show inventory grew at an inflation adjusted $125.5 billion rate…this came after inventories had grown at an inflation adjusted $96.8 billion rate in the 4th quarter, and hence the revised $28.7 billion increase in real inventory growth over that of the 4th quarter added 0.60 percentage points to the 1st quarter’s growth rate, revised from the 0.65 percentage point addition from inventory growth shown in the advance estimate….however, since growth in inventories indicates that more of the goods produced during the quarter were left “sitting on the shelf” or in a warehouse, that increase by $28.7 billion meant that real final sales of GDP were actually smaller by that much, and therefore the BEA found that real final sales of GDP rose at a 2.5% rate in the 1st quarter, same as the real final sales rate shown in the advance estimate due to rounding…

The previously reported increase in real exports was revised higher with this estimate, while the previously reported decrease in real imports was revised lower by a greater amount, and as a result our net trade was a somewhat smaller addition to GDP rather than was previously reported…our real exports grew at a 4.8% rate, revised from the 3.7% rate shown in first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their increase added 0.58 percentage points to the 1st quarter’s growth rate, revised from the 0.45 percentage point addition shown last month…meanwhile, the previously reported 3.7% decrease in our real imports was revised to a 2.5% decrease, and since imports subtract from GDP because they represent either consumption or investment that was not produced in the US, their decrease conversely added 0.39 percentage points to 1st quarter GDP, revised from the 0.58 addition shown a month ago….thus, our improving trade balance added a rounded 0.96 percentage points to 1st quarter GDP, reduced from the 1.03 percentage point addition resulting from our improving foreign trade balance that was indicated by the advance estimate..

Finally, there was also a small upward revision to real government consumption and investment in this 2nd estimate, as the entire government sector is now shown growing at a 2.5% rate, revised from the 2.4% growth rate for government indicated by the 1st estimate….however, real federal government consumption and investment was seen to have shrunk at a 0.1% rate from that of the 4th quarter in this estimate, which was revised from the unchanged growth rate shown in the 1st estimate, as real federal outlays for defense grew at a 4.0% rate, revised from the previously reported 4.1% growth and added 0.15 percentage points to 1st quarter GDP, while all other federal consumption and investment shrunk at an unrevised 5.9% rate and subtracted 0.16 percentage points from GDP…meanwhile, real state and local consumption and investment grew at a 4.0% rate in the quarter, revised from the 3.9% growth shown in the 1st estimate, and added 0.42 percentage points to 1st quarter GDP, which was revised from the 0.41 addition shown in the advance estimate…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, thereby indicating an increase in the output of those goods or services…

April Personal Income Up 0.5%, Personal Spending Up 0.3%, PCE Price Index Up 0.3%

The April report on Personal Income and Outlays from the Bureau of Economic Analysis includes the month’s data for our personal consumption expenditures (PCE), which accounts for more than 69% of the month’s GDP, and with it the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated…in addition, this release reports our personal income data, disposable personal income, which is income after taxes, and our monthly savings rate…however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics is not the current monthly change; rather, they’re seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much national income and spending would change over a year if April’s change in seasonally 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 March to April..

Thus, when the opening line of the April report tell us “Personal income increased $92.8 billion (0.5 percent) in April“, that means that the annualized figure for seasonally adjusted national personal income in April, $18,099.1 billion, was $92.8 billion, or a bit more than 0.5% greater than the annualized personal income figure of $18,006.3 billion extrapolated for March; the actual, unadjusted change in personal income from March to April is not given…at the same time, annualized disposable personal income, which is income after taxes, rose by more than 0.4%, from an annual rate of an annual rate of $15,889.3 billion in March to an annual rate of $15,958.6 billion in April….the contributors to the annualized $92.8 billion increase in personal income can be viewed in the Full Release & Tables (PDF) for this release, also as annualized amounts, and were led by a $44.6 billion increase to $2,801.8 billion in interest and dividend income, a $26.5 billion increase to $9,070.2 billion in wages and salaries, and a $17.6 billion increase to $3,173.5 billion in personal current transfer receipts from benefit programs; again, those are all annualized figures…

For the April personal consumption expenditures (PCE) that will be included in 2nd quarter GDP, BEA reports that they increased at a $40.8 billion annual rate, or by less than 0.3%, as the annual rate of national PCE rose from $14,352.5 billion in March to $14,393.4 in April….March PCE was revised from $14,337.5 billion annually to $14,352.5 billion, while February PCE was revised from $14,214.0 billion annually to $14,195.2 billion, revisions that were already included in this week’s GDP report….total personal outlays for April, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $42.7 billion to $14,968.3 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $990.3 billion annual rate in April, up from the revised $963.7 billion in annualized personal savings in March…as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 6.2% in April, after the previously reported 6.5% March savings rate was revised to 6.1%…

As you know, before those personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption….that’s done with the price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is computed by the BEA and included in Table 9 in the pdf for this report…that index rose from 109.155 in March to 109.496 in April, a month over month inflation rate that’s statistically 0.3124%, which BEA reports as an increase of 0.3 percent, following the 0.2% increase in the PCE price index reported for March…applying that April inflation adjustment to the nominal changes in PCE left real PCE statistically unchanged in April, after the March real PCE increase was revised to an increase of 0.9%…note that when those PCE price indexes are applied to a given month’s annualized PCE in current dollars, it yields that month’s annualized real PCE in those familiar chained 2012 dollars, which are the means that the BEA uses to compare the goods and services produced in one month or one quarter to the real goods and services produced in another….that result is shown in table 7 of the PDF, where we see that April’s chained dollar consumption total works out to 13,145.6 billion annually, 0.02814% less than March’s 13,149.3 billion, a decrease that the BEA reports as “less than 0.1%”…

However, to estimate the impact of the change in PCE on the change in GDP, that month over month change doesn’t help us much, since GDP is computed & reported quarterly… thus we have to compare April’s real PCE to the the real PCE of all 3 months of the first quarter….while this release reports PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 1st quarter was represented by 13,075.1 billion in chained 2012  dollars..(note that’s the same as is shown in table 3 of the pdf for the 1st quarter GDP report)….when we compare April’s adjusted PCE of 13,145.6 billion to the 1st quarter real PCE of 13,075.1  billion on an annual basis, we find that April real PCE has grown at a 2.174% annual rate compared to that of the 1st quarter….this means that even if April real PCE does not appreciate during May and June, growth in PCE would still add 1.50 percentage points to the growth rate of the 2nd quarter…

 

(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 picked from the aforementioned GGO posts, contact me…)       

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