3rd estimate of 4th quarter GDP; February personal income and spending; new reports on home sales and prices, et al

it’s been a fairly busy week for economic news releases, with the two important reports, the 3rd and final estimate of 4th quarter GDP, and data on Personal Income and Spending for February, coming at the end of the week; earlier we saw several reports on home prices, the Census survey on new home sales, and the report on pending home sales from the NAR, and also March reports on consumer confidence from the Conference Board and Reuters / U Michigan; for manufacturing, the Census released the monthly report on shipments, inventories, and new orders for durable goods, and there were regional reports on manufacturing from the Richmond Fed and Kansas City Fed, as well as a report from the labor department on productivity and costs by manufacturing industry…in addition, the labor dept also released their monthly report on employment and unemployment by state for February, which gives us a more detailed breakdown of the same data we saw in the employment situation reports we saw three weeks ago…

  on Monday, we saw the release of the Chicago Fed National Activity Index for February (pdf), a composite of 85 different economic metrics grouped into four broad categories of data: production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories, and constructed such that index values above zero indicate growth above the historical trend, while negative values in the index indicate below trend growth; in February, the Chicago Fed found that 3 out of 4 of the broad categories of indicators that make up the index increased from January, and 2 of the 4 categories were positive, as the index increased to +0.14 in February from –0.45 in January, while the less noisy 3 month moving average decreased to –0.18 from +0.02 in January, its first negative reading in six months…production-related indicators reversed their January weakness, adding 0.26 to the February index, after subtracting 0.38 in January; employment-related indicators subtracted 0.02 from the index, after adding 0.13 in January, while the sales, orders, and inventories category added 0.6% to the index in February after a neutral reading in January, finally, the contribution from the consumption and housing category, which was negative in both months, subtracted 0.16 in February after subtracting 0.19 from the index in January…

on Tuesday, the Census Bureau and HUD released New Home Sales for February, a report that typically has the largest margin of error and is subject to the largest revisions of any census construction series; sales of new single-family houses were reported at a seasonally adjusted annual rate of 440,000 in February, which was 3.3 percent (±17.9%)* below the revised January rate of 455,000, and 1.1 percent (±15.2%)* below the estimate of 445,000 in February last year…again, the asterisk on the numbers in a Census report indicates that due to the small sampling and the possibility of errors, they don’t have sufficient data to determine whether new home sales rose or fell in February or over the preceding year…the expression “3.3 percent (±17.9%)” for February indicates that it’s 90% likely that at the rate of new home sales for the month, when projected over an entire year, would be in a range between 375,760 and 533,280…similarly, new home sales from a year ago might have been an increased 14.1% or decreased 16.3%; they just don’t have enough data to know one way or the other…based on field agents reporting, an estimated 35,000 new homes actually sold in February, up from 33,000 in January; the median new home sales price in February reportedly was $261,800, and the average sales price was $317,500…

January Case-Shiller Home Prices Index Up 13.2% from a Year Earlier

as it was the last week of the month, Tuesday also saw the release of the Case-Shiller home price indexes for January, which indicated that prices received for homes sold over the three month period from November to January slipped 0.1% in the 20 cities covered compared to home prices vis-a-vis the 3 months ending December, but were nonetheless 13.2% higher than the same period last year… 12 of the metro areas saw home prices decline, with Chicago area prices, off by 1.2%, declining the most, while Las Vegas prices, up 1.1, seeing the largest increase…this was the third small monthly decline in the price index in row, typical for this time of year, and we wouldn’t be surprised to see next month’s index, covering the heart of winter, see a decline as well…the Composite 20 index, which was formulated so that home prices in the 20 metro areas included equaled to 100.00 in 2000, was at 165.50, off 18.7% from the peak of 206.61 set in April of 2006, and up 20.8% from the recent low of 137.05 set in February 2012…

as a result of the recent changes at the St Louis Fed’s FRED graphs website, the pair of FRED graphs we created to show the historical track of home prices in each of the cities in the 20 city index can now be viewed interactively, although not on all websites, nor via email; we are including screen pictures of each of those graphs below; use the text links provided to view the same graphs as interactive, wherein you can move your cursor across the graph and view the monthly history of the changes in the price indices for all 20 cities…recall that these indices do not reflect prices, just the difference in price relative to other months on the chart, and relative to the setting of 100.00 that all cities were set at in 2000 when the index was established, which is the start date for both of the charts below… in the first FRED graph, we have the tracks of home price indexes for Atlanta in bright blue, Boston in bright red, Charlotte in dark green, Chicago in orange, Cleveland in purple, Dallas in grey, Detroit in mauve, Denver in mustard, Las Vegas in dull blue, and Los Angeles with the highest price track on this chart in beet red (for the larger interactive view of this graph at FRED, click here

January 2014 Case Shiller A to L

the second FRED graph shows the the historical price track of each of the metro home price indexes for Miami in bright blue, Minneapolis in bright red, New York in dark green, Phoenix in orange, Portland in violet, San Diego in grey, San Francisco in mauve, Seattle in mustard, Tampa in dull blue and Washington DC in beet red; in addition, this second chart includes the track of the Case-Shiller Composite 20 shown as a heavier black line…again, click here for the larger 1000 pixel interactive version of this graph at the St Louis Fed web site, where all the lines can be easily traced with their interactive tool…

January 2014 Case Shiller M to Z

we have recently learned that FRED will discontinue carrying data from S&P, which includes all 179 series of S&P/Case-Shiller Home Price Index data, from which the above graphs were created…we intend to embed these interactive versions of the graphs above on Marketwatch 666 later this evening, where they’ll viewable until they stop functioning or the data becomes obsolete, so drop over and take a look while they’re still there….the interactive FRED graphs have performed differently using different operating systems and browsers, so if you have trouble viewing them, let me know, i’ll pass it on to the site developers…

the other widely watched housing market release this week was of the Pending Home Sales Index for February from the National Association of Realtors, which fell 0.8% to 93.9 from a downwardly revised 94.7 in January, the largest drop in 3 years and the 8th month in a row that this index has fallen…this index, which is now 10.5% lower than last February, is based on the level of home sales contract signings during 2001 being equal to 100, and it’s drawn from a sample representing roughly 20% of transactions for existing-home sales; home sales are considered pending when the contract is signed but the sale has not yet closed, and this index generally leads existing home sales by a month or two…in terms of the period of home sale closings included in the Case-Shiller home price index for January which we’ve just reviewed, which includes closings from the beginning of November, then, these pending sales are 3 to 7 months in the future, which puts those delayed prices into a bit of perspective… although the NAR blamed the weakness in this report on the weather, the index for the South was off 9.3% year over year, while the index in the West was 16.5% below a year ago…

on Wednesday, the Census Bureau released the February Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders (pdf), which estimated that the widely watched new orders for manufactured durable goods increased $5.0 billion, or 2.2%, to $229.4 billion in February, after a 1.3% decrease in new orders in January…as is usually the case, new orders for civilian aircraft, which were up 13.6% in February, made all the difference; without the volatile transportation sector, new orders increased just 0.2%…new orders for defense aircraft were also up 21.1%, while the important new orders for nondefense capital goods were off 2.8%….this release also reported that February shipments of durable goods increased 0.9% over January to $234.0 billion, more than reversing the weather related January decline in shipments of 0.6%, while inventories of durable goods increased $3.2 billion or 0.8% to $392.3 billion, a new record high…unfilled orders for manufactured durable goods were also at a new record high in February, as they rose $2.9 billion or 0.3% to $1,062.6 billion…in other manufacturing reports, the Richmond Fed, whose district includes the Virginias, Maryland, the Carolinas, and the District of Columbia, reported that manfacturing in that region continues to contract, as their manufacturing composite came in at a minus 7 in March, slightly worse than February’s minus 6, while the Kansas City Fed reports their month-over-month composite index was at 10 in March, up from 4 in February, indicating a greater expansion of manufacturing in their district, which includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico..

Fourth Quarter GDP Growth Rate Revised to 2.6%

the 3rd and final estimate of 4th quarter and full year GDP from the Bureau of Economic Analysis indicated that our real total output in goods and services grew at a 2.6% seasonally adjusted annual rate in the 4th quarter and by 1.9% for the full year, ie, from 2012 to 2013…in current dollars, before adjusting for inflation, our 2013 GDP was $16.7997 trillion, up 3.4% from the $16,2446 trillion GDP of 2012…recall that the first or advance GDP estimate had the 4th quarter growth rate at 3.2%, while the 2nd estimate a month ago lowered that to an annualized growth rate of 2.4%…major factors in this revision were larger than previously estimated personal consumption expenditures for services, which were partially offset by markdowns of investment in intellectual property and inventories…exports, imports and government investment and consumption were virtually unchanged from the second estimate…as we review the details, remember that the change in “real” GDP components reported here is not a measure of the change in dollar value of our goods and services, but a measure of the change in our units of output, and thus all percentage changes cited in this report are based on inflation adjusted chained 2009 dollars…also note all the quarterly percentage changes noted herein are at an annual rate, ie, written as if the actual growth in the quarter were extrapolated over an entire year… 

the seasonally adjusted 4th quarter growth rate in real personal consumption expenditures at 3.29% actually came in closer to the first estimate of 3.34% than the revised estimated growth rate of 2.6% reported in the 2nd estimate last month; however, consumption of goods in this 3rd estimate were somewhat lower; the entire change in increased PCE came from increased consumption expenditures for services, which grew at a 3.5% annual rate and accounted for 1.57% of the quarterly growth rate in GDP by themselves, which was a major revision of the 2.2% growth rate and an 1.00% addition to GDP reported in the 2nd estimate….more than a third of 4th quarter growth in  consumption of services was an increase in spending for health care services, which increased by a seasonally and inflation adjusted $24.4 billion rate in the quarter, while there were also sizable upticks in spending for food services and accommodations and increased outlays for financial services and insurance…spending for durable goods, meanwhile, increased at a 2.8% annual rate, not the 2.5% rate reported last month, and added .21% to GDP while consumption of non-durables was marked down from a 3.5% growth rate to a 2.9% rate and added 0.45% to GDP, as real purchases of food increased at a 3.15% rate in the 4th quarter…

there were also some significant revisions to previously reported figures for the components of 4th quarter real gross private domestic investment….real fixed private investment, which had been reported growing at seasonally adjusted 3.8% annual rate, is now revised to have increased at a 2.8% annual rate, as real investment in non-residential structures is now reported to have contracted at a 1.8% rate rather than the 0.2% growth rate reported last month, and the reported increase in investment in intellectual property was cut from an 8.0% rate to a 4.0% rate; meanwhile, the real increase in investment in equipment has been increased from a 10.6% rate to a 10.9% growth rate, and real residential investment is now seen contracting at a 7.9% annual rate rather than the 8.7% rate of contraction reported in the 2nd estimate…as a result of these revisions, the increase in non-residential fixed investment added .68 percentage points to the 4th quarter GDP growth rate, with equipment accounting for .58% of that, while non-residential structures subtracted .05% and intellectual property added .15%…meanwhile, the contraction in real residential investment subtracted 0.26% from the 4th quarter growth rate, not the 0.29% originally reported…in addition, instead of the increase in private inventories reported in earlier reports, inventories are now seen to have shrunk by an inflation adjusted $4.0 billion and thus subtracted 0.02% from GDP, a marked contrast to the 1.67 percentage points that inventory building added to the 3rd quarter GDP growth rate…thus, real final sales of domestic product, a metric which subtracts the change in unsold private inventories from GDP, increased 2.7% in the 4th quarter, compared with an increase of 2.5% in the 3rd, despite the fact that headline 3rd quarter GDP was up at a 4.1% pace, the strongest growth rate over the past two years…

as we mentioned earlier, there was little change in reported figures for exports and imports…to review, exports add to gross domestic product because they represent that part of our production that is not consumed or added to investment in our country, while imports subtract from GDP because they represent either consumption or investment that was not produced here…in the 4th quarter, real exports of goods and services increased at a 9.5% rate, which was up a tad from the 9.4% rate of increase reported a month ago, while real imports of goods and services increased at a 1.5% rate, same as was reported previously…as a result, the increase in exports added 1.23% to the 4th quarter growth rate, while the increase in imports subtracted .24% from it, making the total impact from an improving trade deficit nearly a point improvement in GDP..

in like manner, there were just minor revisions to the previously reported change in government consumption and investment…as you should recall, the 4th quarter of last year included a partial shutdown of the Federal government during October, hence that sector was a major drag on 4th quarter GDP figures, as real federal government consumption expenditures and gross investment fell at a 12.8% annual rate, which included a reduction in defense spending at a 14.4% rate, which reduced GDP by 0.70%, and a decrease in Federal investment and consumption expenditures at a 10.0% rate, which subtracted 0.29% from 4th quarter growth..since they still add up to a total 1.00% hit to GDP, any change from the 2nd estimate was not statistically significant…meanwhile, consumption and investment outlays by state and local governments is now reported as unchanged in the 4th quarter, and hence had no impact on the change in GDP; that was a minor positive revision from the previously reported decrease at 0.5% rate in state and local outlays..

below we have a screenshot of our regular FRED graph for this report, which has been updated with these latest revisions…each group of seven color coded bars shows the inflation adjusted contribution from each of the major GDP components for each quarter since the beginning of 2011… within each quarterly grouping of seven bars, the quarterly change in real personal consumption expenditures is shown in blue, the change in gross private investment, including structures, equipment and intangibles, is shown in red, the change in imports is shown as a negative in green, the change in exports are shown in purple, the change in private inventories is in yellow, the change in state and local government spending and investment is shown in pink, while the change in Federal government spending and investment is shown in grey…those components of GDP that contracted in a given quarter are shown below the zero line and subtracted from GDP in that quarter, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they’ll appear below the zero line…we have removed the dating from this chart because it was in error, but you can view the accurate quarterly listing of all the data below using the interactive version of this graph at the FRED website…even without that, it’s still clear from the chart below that the major contributions to growth in the 4th quarter were personal consumption expenditures in blue and exports in violet, while the Federal government shutdown was the major negative, as lower Federal outlays shown in grey took a whole point off the 4th quarter’s growth rate…

3rd revsion, 4th qtr 2013 GDP 2

February Incomes Rise 0.3% on Government Transfers; Personal Consumption Also up 0.3%

the major monthly release this week, also from the Bureau of Economic Analysis, was on Personal Income and Outlays for February, which in addition to the important personal income data, also reports the monthly data on our personal consumption expenditures (PCE), which as we just saw is the major component of GDP…from that data, the BEA also computes personal savings and the national savings rate, as well as the price index for PCE, which is the inflation gauge the Fed supposedly targets and which is used in this report to adjust both personal income and consumption expenditures for inflation….like the GDP reports, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts… however, the percentage changes are expressed as a month over month change and are used within the report as if they refer to the annualized amounts, so it’s often been misreported that way…

total personal income increased in February by a seasonally adjusted and annualized $47.7 billion rate to $14,398.8 billion, which was 0.3% higher than in January, when personal income also increased by 0.3%….disposable personal income (DPI), which is income after taxes, increased at an annualized rate of $42.3 billion to $12,706.2 billion, which was also a 0.3% increase over January, while January’s DPI was up 0.3% over December, revised from the 0.4% increase reported last month…special factors were again a major factor in the income increases, as wages and salaries only rose at a $13.0 billion annual rate, or less than 0.2% over January… like January, the greatest increase in February incomes was from increases in current transfer receipts from the government to individuals, which added $18.6 billion to February incomes, after an increase of $29.9 billion of transfers in January; by far the largest of those was from expanded Medicaid coverage under Obamacare, which increased at an $11.4 billion rate in February after jumping at a $19.3 billion in January; meanwhile, increases in current transfer payments were partly offset by the loss of expired emergency rations for the unemployed, which reduced transfer payments by an annualized $2.5 billion in February and $16.7 billion in January….other sources of February income increases included incomes of individual business owners, which rose at a $7.7 billion rate in February, a bit less than the $8.0 billion increase in January; $2.0 billion of that was income of farm owners, down a bit from the $2.1 billion income increase they saw in January…in addition, rental income of individuals increased $3.1 billion and income on assets, such as interest and dividends, increased at an annual rate of $2.5 billion…

meanwhile, seasonally adjusted personal consumption expenditures (PCE) rose at an annual rate of $30.8 billion to $11,742.7 billion, 0.3% higher than PCE for January, which was revised down to a $20.0 billion increase over December, from the originally reported $48.1 billion January increase…most of the February spending increase was for services, as outlays for services rose at a $25.6 billion rate to an annualized $7,840.2 billion…spending for durable goods, on the other hand, was down for the 3rd consecutive month, dropping at a $2.3 billion rate in February to $1,250.0 billion, after falling $6.0 billion in January and $33.5 billion in December…meanwhile, spending for non-durable goods rose at a $7.4 billion annual rate to $2,652.4 billion after falling at a $23.6 billion rate in January….

while personal consumption expenditures account for more than two-thirds of our national product, before they can be included in real GDP they must be adjusted for inflation; that’s done with the price index for personal consumption expenditures, which is based on chained 2009 prices = 100…that index rose to 108.017 in February from 107.936 in January, a month over month inflation rate of less than 0.1%; thus, inflation adjusted or real personal consumption expenditures rose by 0.2% in January, as did real disposable personal income…the PCE index for durable goods again fell 0.2% after falling every month last year, while the PCE price index for non-durable goods was unchanged for the second month in a row, while the 0.2% increase in the PCE price index for services accounted for the rise in the overall inflation rate…on a annual basis, PCE inflation is now near a 4 year low at 0.87%, far below the 2.50% PCE inflation rate the Fed has allegedly been trying to hit..

by adding interest payments and personal transfer payments to governments to personal consumption expenditures we find total personal outlays were running at an annual rate of $12,161.7 billion in February, an increase of $30.8 billion over January…subtracting that from national disposable personal income at a $12,706.2 billion rate tells us that personal savings grew nationally at a $544.5 billion rate in February, up from $535.9 billion in January…that increase was enough to generate a statistical uptick in the personal savings rate, which is total personal savings as a percentage of disposable personal income, from 4.2% to 4.3%…the screenshot of our FRED graph for this report below shows the monthly personal savings rate in green since January 2007, with the savings rate indicated as a percentage on the right margin of the graph…also shown is real disposable personal income in blue and real personal consumption expenditures in red over the same time frame, with the scale in billions of chained 2009 dollars for both on the left…the recent spike in income and savings you see on that graph was generated by year end tax shenanigans that pulled normal bonuses and dividends back in to December 2012 to avoid fiscal cliff related tax increases; the earlier spikes were as a result of the tax rebates enacted as a fiscal stimulus under George Bush….click here for the interactive version of the graph below at the FRED website, where you can step through the monthly changes in each of those metrics by moving your cursor across the graph…

February 2014 income and outlays

also on Friday, the BLS released their monthly report on Regional and State Employment and Unemployment Summary for February, which showed non-farm payroll employment increased in 33 states and decreased in 17 states and the District of Columbia, while the unemployment rate rose in 10 states, fell in 29, and was unchanged in the rest…seasonally adjusted non-farm payrolls by state and selected industry sector are here; the unemployment rate and other labor force data by state and for a few large metro areas is herethe bar graph below is from Bill McBride’s coverage of this report, and it shows the current unemployment rate by state in red, from the states with the highest unemployment rates starting with Rhode Island at 9.0% on the left, to the lowest unemployment rate at 2.6% for N.Dakota on the right, with the peak unemployment rate each state hit during this long recession, that began in 2007, in blue…click here to view it full sized

Febraury 2014 state enemployment

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

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