November trade in goods, October Case-Shiller home prices, and a note on 3 month averages

the only widely watched report released this week was the S&P/Case-Shiller Home Price Indices for October, which are really a 3 month average of August, September and October home prices….in addition, we saw the Advance Report: U.S International Trade in Goods for November (pdf) a relatively new report from the Census which was supposed to provide early data on trade for the BEA in advance of the GDP report, which was released early last week this month…this report receives very little media coverage, probably because it’s been just 7 pages of tables with no summary press release…this week also saw the Dallas Fed Texas Manufacturing Outlook Survey, the last of the regional Fed manufacturing surveys for December, which reported their general business activity composite index fell to -20.1 from -4.9 last month, the 12th negative reading in a row, indicating the ongoing recession in the Texas oil patch economy is getting worse, while we also saw the private release of the Chicago Purchasing Managers Index (PMI) for December, which reported their Chicago Business Barometer fell 5.8 points, from 48.7 in November to 42.9 in December, the lowest since May 2009., in a diffusion index where readings below 50 indicate that a plurality of Chicago area purchasing managers saw a slowing down in various facets of their business…

Advance Report on Trade in Goods Shows November Deficit Down 1.3%

the Advance Report on our International Trade in Goods for November (pdf), which will likely be revised when the full report is released next week, showed that our trade deficit in goods fell to $60.5 billion for the month, from a revised $61.3 billion goods deficit in October, as both exports and imports of goods fell…our exports of goods fell from $123,437 million in October to $120,970 million in November, while our imports of goods fell from the previously reported $184,713 million in October to $181,472 in November…this advance report originally indicated our October goods deficit was at $58.4 billion, whereas the full report a week later showed the goods deficit to be at $61,276 million, so substantial revision of these advance figures are possible..

export prices were 0.6% lower in November, so our real exports of goods were higher by that percentage, while November imports were priced 0.4% lower, similarly incrementally increasing growth in real imports…all end-use categories of exports saw nominal decreases in November, with industrial supplies, consumer goods and, automotive products showing the largest percentage decreases…while we imported $84 million more foods, feeds and beverages and $58 million more automotive products than we did in October, all other end use categories of imports also fell, led by a 3,123 million or 6.0% drop in our imports of consumer goods…the full report next week will include a full itemized list of exports and imports items that changed from month to month, so we’ll review those at that time…next week’s full report will also have a table adjusting our imports and exports for changes in price, which will allow us to more easily estimate the impact of two months of each on 4th quarter GDP, than it would be to attempt to do that with unadjusted data and price indexes now…

October Case-Shiller Report Shows National Home Prices up 5.2% Since Last Year

the Case-Shiller house price indexes for October indicated a 5.1% year over year increase in sales prices on repeat home sales in the ten cities of the original index, a 5.5% year over year increase in the 20 City Composite, and a 5.2% increase in home prices nationally since the October report of last year, led by 10.9% increases in home prices in San Francisco, Denver and Portland….Case-Shiller also reports a ‘monthly’ increase of 0.1% in the national index and the in 20 city index, and no change in the 10 city index, all of which compare prices of houses sold in August, September and October to those sold in July, August, and September, and hence the change in the month over month indexes are arithmetically equal to 1/3rd the difference between July home prices and October home prices, ie, not really a useful monthly change at all…seasonally adjusting those so called month over month indexes shows that the national index is 0.9% higher than last month’s, while the 10 and 20 city indices would be up 0.8% from the previous report….thus, while home prices in just 10 of the 20 cities showed an increase in October prices when compared to those of July, after those seasonal adjustments were applied, home prices in all 20 of the cities increased…the full pdf of the release, titled Continued Increases in Home Prices for October, is here, and it includes full unadjusted and adjusted tables for all 20 cities and the 3 indexes, as well as graphs and commentary…for coverage of this Case-Shiller report on the web, Robert Oak at the Economic Populist includes 6 graphs in his thorough post titled Case-Shiller Shows Housing Price Gains Continue, and Bill McBride has two posts, which include several graphs: Case-Shiller: National House Price Index increased 5.2% year-over-year in October, followed by his analysis in Real Prices and Price-to-Rent Ratio in October

included below are the pair of interactive FRED graphs we had created to show the historical track of the home price indexes for each of the cities in the 20 city index, which are all based on January 2000 home prices equal to 100.0, such that an index reading of 180.0 thus means that the average home price in that city rose 80% since that date… in our first FRED graph, we show 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 in beet red… for the larger interactive view of this graph at FRED, click here; there you can move your cursor across the graph and view the monthly price history of the changes in the price indices for all 10 cities shown below, just as we have included the home price index values for each of them for the October report in our screenshot…

October 2015 Case Shiller A-L

our second FRED graph of the Case-Shiller city indices shows the the historical price track 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…the basic S&P Case-Shiller index is not seasonally adjusted, and you will notice that the seasonal home price swings have become more pronounced since the housing bust…again, you can 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 and the index values for each viewed over time with the interactive tool provided at that site…

October 2015 Case Shiller M-z

A Note on Comparing 3 Month Moving Averages

as we mentioned, since Case-Shiller indexes are simple averages of home price changes over 3 months, they are not very useful for monthly comparisons…that’s simply because two of the months are being compared to themselves, leaving only prices changes from the current month, and the month before the month before last left in each month over month comparison….this is also the case with any three month average, which we can represent by (a + b + c) / 3, with a being the current month, b being last month, and c being the month before that…another way of writing that same expression is “a/3 + b/3 + c/3 ” …. when one compares that to the prior month 3 month average, represented by (b + c + d) / 3, where d is the month before the month before last, we end up comparing (a/3 + b/3 + c/3) to (b/3 + c/3 + d/3), and since two of our elements in that comparison are identical, the comparison simply becomes a/3 to d/3, or one-third the difference between a and d….the trouble is, such 3 month averages are used by economists everywhere as if they’re providing some special insight…even the Chicago Fed elevates it’s three month average of the National Activity Index to the version that should be followed to remove month to month volatility…so in the Chicago Fed National Activity Index (CFNAI) for November, which shows the 3 month index fell from –0.18 in October to –0.20 in November, they are actually comparing their August index to that of November, which is virtually a useless comparison…

(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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