September consumer and producer prices, retail sales, and industrial production; August business inventories and job openings, et al

there were several major monthly reports that were all released in a 50 hour span of this past week: Wednesday brought retail sales for September and the business inventories report for August from the Census bureau and the September Producer Price Index from the Bureau of Labor Statistics; the BLS followed that with the September Consumer Price Index on Thursday and the Job Openings and Labor Turnover Survey (JOLTS) for August on Friday, the same morning the Fed released the September report on Industrial Production and Capacity Utilization…in addition, Thursday also saw the release of the first two regional Fed manufacturing indexes for October: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from -14.7 to -11.4, the third month in a row below minus ten, indicating an ongoing recession in First District manufacturing, while the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from -6.0 in September to -4.5 in October, also indicating an ongoing slowdown in the region’s manufacturing….

September Consumer Price Index Down 0.2% on Lower Energy Prices

despite higher prices for food and shelter, the consumer price index fell in September on significantly lower energy costs…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices fell 0.2% in September after falling 0.1% in August and rising monthly since March…the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, fell to 237.945 in September from 238.316 in August, which left it statistically unchanged from the 238.031 reading of September of last year…regionally, prices for urban consumers have risen 1.0% in the West, while they have fallen 0.4% in the South, 0.8% in the Midwest and 0.1% in the Northeast over the past year, with greater increases within regions in cities of more than 1,500,000 people…since lower energy prices were the major reason for the drop in the overall CPI index, core prices, which exclude food and energy, rose by 0.2% in September, as the unadjusted core index rose from 242.651 to 243.359, a level 1.89% ahead of its year ago reading of 238.841…

the seasonally adjusted energy price index fell by 4.7% in September after falling by 2.0% in August and the energy index is now 18.4% lower than it was in September a year ago…prices for energy commodities were 8.6% lower in September while the index for energy services saw a 0.4% decrease, the 4th drop for services in the last five months….the decrease in the energy commodity index was driven by a 9.0% drop in the price of gasoline, the largest component, while fuel oil prices fell 2.4% and prices for other fuels, including propane, kerosene and firewood, averaged a 1.1% decrease…within energy services, the index for utility gas service fell by 0.3%, leaving utility gas priced 12.1% below a year ago, while the electricity price index fell by 0.5%, after it rose by 0.3% in August…energy commodities are now priced 29.5% below their year ago levels, with gasoline now 29.6% lower than it was a year ago, while the energy services price index is now 3.0% lower than last September, as electricity prices have also fallen 0.4% over that period… 

the seasonally adjusted food index rose by 0.4% in September, after rising 0.2% in both July and in August, as prices for food at home rose 0.3% while prices for food away from home rose 0.5% on a 7.2% increase in school lunches, while average prices at fast food outlets rose 0.4% and rose 0.2% at full service restaurants…the increase in prices for food at home was driven by 0.7% increases in dairy products and fruits and vegetables, while the miscellaneous “other food at home” index rose 0.8%…the dairy products index increase appears to be a seasonal adjustment artifact, as only milk prices rose as much as 0.6%, while the fruit and vegetable index increase was caused by a 0.9% increase in prices for fresh fruit including a 2.8% increase in apple prices and a 1.0% increase in prices for fresh vegetables including a 4.7% increase in lettuce prices while the price index for processed fruit and vegetable was unchanged…in the ‘other food at home’ category, soup prices were up 1.6%, sauces and gravies rose 2.5%, prepared salads rose 2.1% and peanut butter prices were 1.3% higher…meanwhile, the index for cereals and bakery products was 0.2% lower as rice prices fell 1.8% and breakfast cereals averaged 1.7% lower while white bread prices were up 1.4%, and the index for meat, poultry, fish and eggs fell 0.3% on a 3.0% drop in chicken prices and 1.3% lower beef roasts while bacon prices rose 3.5%….while egg prices were 0.6% lower in September, they remain 36.2% higher than a year ago, while ham prices are now down 11.1% year over year…and in the last food category, the index for beverages and beverage materials was down 0.1% as tea prices fell 1.4% while non-carbonated juices rose 0.5%…the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall

among the seasonally adjusted core components of the CPI, which rose by 0.2% in September, the composite of all commodities less food and energy commodities was unchanged, while the composite for all services less energy services rose by 0.3%….among the commodity components, the index for household furnishings and supplies rose 0.3% on a 1.9% increase in infant’s furniture and a 1.3% increase in laundry equipment, apparel prices were down 0.3% on a 3.7% lower prices for girls apparel and 0.9% lower prices for women’s apparel including 2.9% lower prices for dresses; transportation commodities were down 0.1% on 0.2% lower prices for new and used cars while car parts other than tires rose 0.8%; medical care commodities were down 0.2% on 0.2% lower prices for both drugs and medical supplies; recreational commodities were 0.3% higher on a 0.6% increase in prices for pets and pet supplies; education and communication commodities rose 0.1% despite 3.2% lower prices for phone hardware as personal computers cost 0.8% more and prices for college textbooks rose 0.7%, and the indices for both alcoholic beverages and for other goods both rose 0.1%…

within services, the price index for shelter rose 0.3% on a 0.4% increase in rents and an 0.8% increase in lodging away from home; medical care services rose 0.3% on 0.3% higher doctor bills and 0.4% higher glasses and eye care; transportation services rose 0.1% on 0.5% higher vehicle insurance while car and truck rentals fell 3.3%; recreation services fell 0.1% despite a 2.3% increase in video rentals as admission to sporting events was 1.8% lower; education and communication services were 0.3% higher on 0.4% higher postage and 0.3% higher tuition and telephone services, and other personal services rose 0.3% on a 0.9% increase in legal fees…other than the aforementioned ham and eggs and energy prices, only telephones, which are now down 15.8%, and televisions, which are 13.6% cheaper, saw their prices change by more than 10% over the past year…

September Producer Price Index Down 0.5% on Widespread Lower Prices

meanwhile, wholesale prices fell more than expected in September as none of the component indices indicated an increase…the seasonally adjusted Producer Price Index (PPI) for Total Final Demand came in with a 0.5% decrease as prices for finished wholesale goods fell by 1.2% while margins for final services providers were 0.4% lower…this follows an August report that showed the overall PPI unchanged, with final demand for goods down 0.6% while final demand for services rose 0.4%….producer prices are now down 1.1% over the past 12 months, as the PPI has fallen 6 times over that span, with the index for final demand for goods down 9 of the 12 months and the index for final demand for services down 4 times the past year…

the index for final demand for goods, aka ‘finished goods’, fell by 1.2% in September after falling 0.6% in August, as the index for wholesale energy prices fell by 5.9% as wholesale gasoline prices fell 16.6% and wholesale diesel fuel prices fell 12.8%…the price index for final demand for foods was 0.8% lower, as wholesale fresh egg prices, which were up 32.3% in August, fell 18.2% in September and wholesale beef prices fell 7.9%, while wholesale fresh vegetable prices rose 7.2% and wholesale fresh fruit rose 8.6% (see table 4)…excluding food and energy, the index for final demand for wholesale core goods was unchanged in September, as it was in 5 months this year, as a 4.4% decrease in industrial chemical prices was the only core producer price change greater than 1%….core prices are now up just 0.2% for the year, with finished consumer nondurable goods up 3.4% while core wholesale goods for export prices fell 3.6%..

as we previously noted, the index for final demand for services fell 0.4% in September after rising 0.4% in August, as the index for final demand for transportation and warehousing services fell 0.7%, the index for final demand for trade services fell 0.4%, and the index for final demand for services less trade, transportation, and warehousing services was up down by 0.3%…..seasonally adjusted margins for apparel, footwear, and accessories retailing fell 1.9% as did margins for airline passenger services, while margins for automotive fuels and lubricants retailing rose 8.1%….of core services, margins for securities brokerage and investment advice fell 4.3%, portfolio management services fell 2.7%, and recreational activity instruction fees were 8.0% lower, while margins for deposit services rose 2.8% and margins for arrangement of vehicle rentals and lodging rose 3.8%…

in addition, this report showed the price index for processed goods for intermediate demand fell by 1.5% in September after a 0.6% decrease in August as intermediate processed goods prices have now been down 12 our of the last 14 months and are now 8.2% lower than in September a year ago….the September decrease was driven by a 4.8% drop in prices for intermediate energy goods, and a 2.3% decrease in the index for processed foods and feeds, while the price index for processed goods for intermediate demand less food and energy fell 0.6%…in addition, the price index for intermediate unprocessed goods fell 3.1% after falling 4.4% in August, on a 5.7% drop in the index for unprocessed foodstuffs and feedstuffs, a 1.1% decrease in the price of crude energy materials and a 1.1% drop in producer prices for other raw materials…this raw materials index still remains 26.1% lower than it was a year ago, and is now more than 30% below the level of February of 2014…

finally, the price index for services for intermediate demand fell by 0.7% in September following a 0.7% increase in August, as the index for trade services for intermediate demand fell by 0.6%, the index for transportation and warehousing services for intermediate demand fell 0.1%, and the price index for services less trade, transportation, and warehousing for intermediate demand was 0.7% lower…over the 12 months ended in September, the price index for services for intermediate demand has still risen 1.2%…  

September Retail Sales Up 0.1% on Autos; Would Add 0.09 Percentage Points to 3rd Quarter Growth

seasonally adjusted headline retail sales rose just 0.1% in September while August sales were revised 0.2% lower and July’s sales were revised 0.1% higher, resulting in an advance sales figure statistically unchanged from last month’s report…the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $447.7 billion, which was an increase of 0.1 percent (±0.5%) from August’s revised sales of $447.2 billion and 2.4 percent (±0.7%) above the sales of September of last year…August’s seasonally adjusted sales were revised from the $447.7 billion first reported to $447.2 billion, while July’s sales, which were revised up to $446.9 billion from the originally reported $446.5 billion last month, were revised up again, to $447.1 billion with this report…estimated unadjusted sales in August, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales fell 5.6%, from $456,513 million in August to $430,925 million in September, while they were up 2.8% from the $420,516 million of sales in September a year ago, indicating a substantial seasonal and holiday weekend adjustment in this month’s report…

since it’s the end of the quarter for retail sales, we’ll include the entire table from this report showing retail sales by business type, including the quarter over quarter data…again, to explain what it shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the August revised figure to this month’s September “advance” report in the first sub-column, and then the year over year percentage sales change since last September in the 2nd column; the second double column pair below gives us the revision of the August advance estimates (now called “preliminary”) as of this report, with the new July to August percentage change under “July 2015 r” (revised) and the August 2014 to August 2015 percentage change as revised in the 2nd column of the pair….then, the third pair of columns shows the percentage change of the most recent 3 months of this year’s sales (July, August and September) from the preceding three months of the 2nd quarter (April, May and June) and from the same three months (July, August and September) of a year ago….that pair of columns gives us a snapshot comparison of 2nd quarter sales to third quarter sales, which is useful in estimating the impact of this report on 3rd quarter GDP….for reference, the table of last month’s advance estimate of August sales, before this month’s revisions is here….

September 2015 retail sales table

as we can see from the above table, it was once again the 1.7% increase to $94,684 million in sales at automobile and parts dealers that drove the September headline change; without those automotive sales, month over month retail sales actually fell by 0.3% to $353,002 million…however, that drop of sales ex-autos was driven by a 3.2% decrease in sales at gasoline stations which was due to lower prices; excluding autos and gasoline, retail sales were relatively unchanged from August…and we see some retail sectors still saw relatively large increases; sales at clothing stores were up 0.9% to $21,620 million, sales at specialty shops such as sporting goods and book stores were also up by 0.9% to $7,444 million, and sales at restaurants and bars again rose 0.7% to $52,691 million….meanwhile, building material and garden supply stores at $27,708 million and groceries at $50,597 both saw 0.3% sales decreases, while sales at electronic and appliance stores and non-store (ie, online) retailers both fell 0.2%…

as you know, to gauge the impact of retail sales on real GDP, we must first adjust the dollar value of those sales for any price changes to give us the quantity of goods sold… one way of doing that would be to adjust the changes in retail sales shown in the 5th column above with appropriate price changes from the consumer price index we looked at earlier…to simply that, most types of retail business sales could be adjusted with the index for commodities less food and energy commodities, which was unchanged in September after being down 0.1% in both July and August…however, grocery store sales would be adjusted with the index for food at home, which was up 0.3% in each month this quarter, meaning real food consumption has declined…then food service sales would be adjusted with the index for food away from home, which was up 0.5% in September after being down 0.2% in August and unchanged in July, and gas station sales could be adjusted with the price index for gasoline, up 0.9% in July, down 4.1% in August and down 9.0% in September, although we’ve seen that’s inexact, because gas stations sell other products…

another way of computing the impact of these sales on GDP would be to use the BEA’s own computations from the personal income and outlays report of August, adjust that with this month’s revisions to July and August, and add or subtract the change in real personal consumption of goods for September which we can compute from this weeks reports…when we looked at the personal income and outlays two weeks ago, we determined that over July and August, real growth in PCE had been at a 3.0% annual rate and would add 2.03 percentage points to the growth rate of the 3rd quarter…in today’s retail report, July’s sales were revised up about $230 million, while August sales were revised down almost $500 million…so a total of $270 million annualized, or about $4.4 billion, would have to be subtracted from previously published annualized PCE for July and August…then to add September PCE to that, we need to adjust the increase in September sales for price changes to get the real quantity of goods sold…the core goods sales are roughly 2/3rds of sales, which as mentioned we’d deflate with the CPI index for commodities less food and energy commodities for September, which was unchanged…removing food and gas sales from total retail we find real core sales were up about $1,200 million in September…then, adjusting food store sales for a 0.3% increase in prices, we find real food sales fell by $350 million in chained August dollars, and adjusting food service sales with the 0.5% increase in prices for food away from home, we find a real increase in food service sales of about $140 million…meanwhile, since gas prices were down 9.0% while margins of fuels and lubricant retailers rose 8.1%, we have no idea on how to properly adjust the 3.2% decrease in gas station sales…so ex gas, real sales were up by just about $990 million in September, which we’ll estimate to be about $12 billion at an annual rate…plugging the $4.4 billion annualized downward revision to July and August and the $12 billion annualized increase in September real PCE into our original August 3rd quarter PCE growth rate computation, we can thus estimate that real PCE has grown at an annual rate of 3.14% in the 3rd quarter, excluding September services data not yet published…that suggests that with the data we have available, real growth in PCE would add 2.12 percentage points to the growth rate of the 3rd quarter, a 0.09 percentage point increase from our previous estimate…that is in contrast to the impact figured by the Atlanta Fed, who saw this report take 40 basis points off GDP….

August Business Inventories Flat, Looks to be a Big Hit to 3rd Quarter GDP

following the release of retail sales report, Census released the composite Manufacturing and Trade Inventories and Sales report for August (pdf), which incorporates the revised August retail data and thus gives us a final 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 $1,320.5 billion in August, 0.6% (±0.2%) lower than July revised sales, and 3.1 percent (±0.5%) lower than August a year earlier…note that total July sales were revised up less than 0.1%, from $1,328.0 billion to $1,328.2 billion….manufacturer’s sales fell by 0.7% from July to $480,143 million, retail trade sales, which exclude restaurant & bar sales from the retail sales reported earlier, fell by 0.1% to $394,874 million, and wholesale sales fell by 1.0% to $445,433 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be at a seasonally adjusted $1,811.0 billion at the end of August, statistically unchanged from July’s total 1,810.3 billion inventory, but up 2.4 percent (±0.5%) from last August…seasonally adjusted inventories of manufacturers were estimated to be valued at $648,385 million, 0.3% lower than July, inventories of retailers were valued at $578,702 million, 0.3% higher than July, and inventories of wholesalers were estimated to be valued at $583,865 million at the end of August, up 0.1% from July…

to compute the impact of inventories on GDP, each component must be adjusted for price changes with an appropriate price index; Chapter 7 of the NIPA handbook (pdf) gives us 22 pages on how that is done…in general, most inventories, even retail, are adjusted with components of the producer price index, and determining the value of the inventories that remain at the end of a month is complicated by the fact that inventories from remaining from previous months are valued at the time they entered the inventory, so a gross adjustment to a given month’s inventories based on the current month’s price change cannot be made…nonetheless, with a 0.1% increase in the nominal value of July business inventories and essentially no change in the August value, we can easily see the 3rd quarter growth in inventories will be much less than the 7.0% annualized increase in the value of inventories from the 1st quarter to the 2nd, and thus this pullback in inventory growth will have a substantial negative impact on 3rd quarter GDP growth…

September Industrial Production Down 0.2% After August Revised Up 0.2%

the Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.2% in September after a 0.4% drop in August was revised to a 0.1% decrease and the 0.9% July increase was revised down to 0.8%, resulting in little change from last month’s report…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, thus fell to 107.1 in September from an revised reading of 107.3 in August, which had originally been reported at 107.1, after the July index was revised from 107.5 to 107.4 while the index for June was unrevised at 106.6…the industrial production index, a measure of real output, is now only 0.4% higher than it was a year ago…however, to the extent that this report plays into GDP, the relatively large increase in July, the only increase in the last 9 months, meant that industrial production for the 3rd quarter increased at a 1.8% rate from the level of the 2nd quarter…

the manufacturing index fell by 0.1% in September after the 0.5% August decrease was revised to 0.4%, the previously reported 0.9% increase in July was revised to a 1.0% increase, and the May 0.1% decrease was revised to unchanged…thus the September manufacturing index is now at 105.5, up from last month’s reported 105.3, which has now been revised to 105.7, while the May manufacturing index was revised from 105.0 to 105.2, the June index was revised from 104.9 to 105.0, and the July index was revised from 105.8 to 106.1…however, even with the de facto increase in September, the manufacturing index still remains just 1.4% higher than a year ago, same as last month’s year over year increase…meanwhile, the mining index, which includes output of oil and gas wells, came in at 114.1 in September, down 2.0% from August, as the August mining index was revised from 116.7 to 116.5…that now leaves it 5.7% below the year ago level, down from the YoY reading last month….lastly, the utility index, which often fluctuates wildly due to above or below normal temperatures, rose 1.3% in September after rising an upwardly revised 1.3% in August…downward revisions to July and other months, however, left the utility index at 104.4, up from the 103.6 reported last month, and up just 1.0% from a year ago…

this report also gives us capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which fell from 77.8 in August to 77.5 in September…seasonally adjusted capacity utilization for all manufacturing industries was down 0.2% to 75.9% in September as manufacturing capacity utilization for August was revised up 0.3% to 76.1%…after a similar upward revision, utilization of durable goods production facilities fell from 76.2% in August to 75.9% in September, while capacity utilization for non-durables fell from 77.5% to 77.4%….capacity utilization for mining fell from 83.7% in August to 81.9% in September, while utilities were operating at 79.8% of capacity during September, up from the revised 78.8% in August…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….

August Job Openings Fall 298,000; Labor Turnover Little Changed

the Job Openings and Labor Turnover Survey (JOLTS) report for August from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 298,000 to 5,370,000 in August after July job openings were revised from 5,753,000 to 5,668,000…August’s jobs openings were still 9.0% higher than the 4,925,000 job openings reported in August a year ago, as the ratio of the unemployed to openings rose to 1.47 from 1.44 in July…job openings decreased across every employment sector except durable goods manufacturing, which saw an increase of 19,000 job openings in August (see table 1 for more details)…like most BLS releases, the press release for report is easily readable and also refers us to the associated table for the data cited, linked at the end of the release…

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in August, seasonally adjusted new hires totaled 5,078,000, up 13,000 from the revised 5,065,000 who were hired or rehired in July, as the hiring rate as a percentage of all employed remained unchanged at 3.6%, which was up from the hiring rate of 3.4% in August a year earlier (details of hiring by industry since May are in table 2)….meanwhile, total separations rose by 50,000, from 4,796,000 in July to 4,846,000 in August, as the separations rate as a percentage of the employed remained unchanged at 3.4%, but was up from the separations rate of 3.3% a year ago (see table 3)…subtracting the 4,846,000 total separations from the total hires of 5,078,000 would imply an increase of 232,000 jobs in August, quite a bit higher than the revised payroll job increase of 136,000 for August reported by the September establishment survey last week, suggesting one or both of these surveys is off by nearly the margin of error expected from these incomplete samplings ..

breaking down the seasonally adjusted job separations, the BLS finds that 2,741,000 quit their jobs in August, up 4,000 from the revised 2,737,000 who quit their jobs in July, while the quits rate, widely watched as an indicator of worker confidence, was unchanged at 1.9% of total employment (see details in table 4)….in addition to those who quit, another 1,688,000 were either laid off, fired or otherwise discharged in August, up 42,000 from the 1,646,000 who were discharged in July, as the discharges rate also remained unchanged at 1.2% of all those who were employed during the month….meanwhile, other separations, which includes retirements and deaths, were at 417,000 in August, up from 413,000 in July, for an ‘other separations’ rate of 0.3%, which was unchanged…both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release

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

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