February’s foreign trade, factory and wholesale inventories, job openings, and Mortgage Monitor

the key release of this past week was the Census report on our International Trade for February, which gives us data on our exports and imports and hence a clarification of the growth in other sectors of the domestic economy…in addition, we also saw two reports that give us two thirds of the inventory data for the first two months of the year: the Full Report on Manufacturers’ Shipments, Inventories and Orders for February and the February report on Wholesale Trade, Sales and Inventories (pdf), both from the Census bureau….the week also saw the release of the Job Openings and Labor Turnover Survey (JOLTS) for February by the Bureau of Labor Statistics, and the Consumer Credit Report for February from the Fed, which showed that overall credit expanded by a seasonally adjusted $17.3 billion, or at a 5.8% annual rate, as non-revolving credit expanded at a 6.6% rate to $2,627.0 billion and revolving credit outstanding grew at a 3.7% rate to $940.6 billion…..the week also saw the private release of the Mortgage Monitor for February (pdf) from Black Knight Financial Services, which we’ll take a look at later in this synopsis, and the March Non-Manufacturing Report On Business from the Institute of Supply Management; which saw their NMI (non-manufacturing index) rise to 54.5%, up from 53.4% in January, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business…

Trade Deficit up 2.6% in February, on Track to Subtract 0.65 Percentage Points from 1st Quarter GDP

our trade deficit rose by 2.6% February, as the net value of both our exports and our imports increased, but our imports increased by more….the Census report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit rose by $1.2 billion to $47.1 billion in February from a January deficit which was revised from $45.7 billion to $45.9 billion…the value of our February exports rose by $1.8 billion to $178.1 billion on a $1.8 billion increase to $118.6 billion in our exports of goods and a fractional decrease to $59.5 billion in our exports of services, while our imports rose $3.0 billion to $225.1 billion on a $2.7 billion increase to $183.3 billion in our imports of goods and a $0.3 billion increase to $41.8 billion in our imports of services…export prices averaged 0.4% lower in February, so the real exports were greater than the nominal dollar value by that percentage, while import prices were 0.3% lower, similarly incrementally increasing the actual amount of real imports over the dollar values reported here…

the February increase in our exports of goods resulted from greater exports of consumer goods, automotive vehicles, parts and engines, foods and feeds, and other goods, which were partially offset by lower exports of industrial supplies and capital goods…referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of consumer goods rose by $1064 million to $17,043 million on a $629 million increase in our exports of gem diamonds and $341 million increase in our exports of pharmaceutical preparations…our exports of automotive vehicles, parts and engines rose by $344 million on a $568 increase in our exports of new and used passenger vehicles which was partially offset by a $280 million decease in our exports of automotive parts and accessories other than tires and engines….our exports of foods, feeds and beverages rose by $310 million to $9,738 million on small increases in many categories of foods and feeds….in addition, our exports of other goods not categorized by end use rose by $618 million to $4,811 million….meanwhile, our exports of capital goods fell $271 million to $42,532 on a $181 million decrease in our exports of civilian aircraft and a $170 million decrease in our exports of electrical apparatuses, and our exports of industrial supplies and materials fell by $179 million to $31,308 million on a $143 million drop in our exports of petroleum products other than fuel oil…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that a jump in imports of consumer goods alone more than accounted for the February increase in our imports, as our imports of consumer goods rose $3,596 million to $51,501 million on a $1,344 million jump in our imports of pharmaceutical preparations, a $552 increase in our imports of toys, games, and sporting goods, a $387 million increase in our imports of textiles other than wool and cotton, a $305 million increase in our imports of cell phones and similar household items and a $271 million increase in our imports of furniture and similar household goods…in addition, our imports of capital goods rose $988 million to $48,967 million on a $422 million increase in our imports of civilian aircraft, a $394 million increase in our imports of computers and a $319 million increase in our imports of computer accessories, and our imports of foods, feeds, and beverages rose by $488 million to $11,210 million on increased imports of fish and shellfish, fruits and juices, beer and wine, and other foods…in addition, our imports of goods not categorized by end use rose by $111 million to $7,201 million…offsetting those increases, our imports of automotive vehicles, parts and engines fell $1526 million to $29,042 million on a $1303 million decrease in our imports of new and used passenger vehicles and a $193 million decrease in our imports of parts and accessories, and our imports of industrial supplies and materials fell by $948 million to $33,606 million on an $890 million drop in our imports of crude oil, a $206 million drop in our imports of fuel oil and a $222 million decrease in our imports of other petroleum products…

to assess the impact of February and January trade data on 1st quarter growth figures, we first need to adjust the value of January’s and February’s imports and exports for changes in price to get the real quantity of both, and then compare those figures to the similarly adjusted 4th quarter figures…however, exhibit 10 in the pdf for this report already gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here….from that table, we can estimate that 4th quarter real exports of goods averaged 118,760 million monthly in 2009 dollars, while inflation adjusted January and February exports were at 115,988 and 118,544 million respectively, according to that same 2009 dollar quantity index representation….averaging January and February goods exports and then annualizing the change between that average and the fourth quarter, we find that the 1st quarter’s real exports of goods are running at a 4.9% annual rate below those of the 4th quarter, or at a pace that would subtract about 0.40 percentage points from 1st quarter GDP…..in a similar manner, we find that our 4th quarter real imports of goods averaged 178,901 million monthly in chained 2009 dollars, while inflation adjusted January and February imports were at 177,759 and 181,890 million respectively after that same adjustment…that would indicate that so far in the 1st quarter, our real imports of goods have increased at a 2.01% annual rate from those of the 4th 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 increase at a 2.01% rate would thus subtract another 0.25  percentage points from 1st quarter GDP….hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to subtract 0.65 percentage points from 1st quarter GDP…

Factory Shipments Down 0.7% in February, Factory Inventories Down 0.4%

in the widely watched Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf), the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $8.0 billion or 1.7 percent to $454.0 billion in February, following an increase of 1.2% in January, revised from the 1.6% increase reported last month, and a decrease of 2.9% in December, which was unrevised….however, as we learned 5 months ago, the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “the factory orders report”; instead, they use shipments data as a proxy for non-durable orders, which means that both the “new orders” and “unfilled orders” sections of this report really only useful as a revised update to the advance report on durable goods we reported on 2 weeks ago…in the case of February’s new orders for durable goods, then, this February Full Report showed that new orders for manufactured durable goods fell $7.0 billion or 3.0% percent to $229.1 billion, revised down from the 2.8% decrease to $229.4 billion reported two weeks ago, which followed a January increase of 4.3% that was revised from the 4.2% increase indicated in that advance report, as new orders for non-defense capital goods excluding aircraft fell by a steeper 2.5% than the 1.8% drop reported in the advance report…including the $1.0 billion decrease in shipments of non-durable goods with the decrease in those orders for durables, then, the Census Bureau reported that new orders for manufactured goods fell by $8.0 billion or 1.7%, which thus became the headline for this report carried in the news media…

more importantly, then, this report indicated that the seasonally adjusted value of February factory shipments fell by $3.4 billion or 0.7 percent to $462.8 billion, the 10th decreasing 11 months, following a 0.2 percent decrease in January, which had previously been reported as a $1.4 billion or 0.3% increase…shipments of durable goods were down $2.4 billion or 1.0 percent to $238.0 billion, revised down from the from the 0.9% decrease reported in the durables report, as lower shipments of transportation equipment led the decrease, falling $1.0 billion or 1.2 percent to $78.9 billion, on a 8.4% drop in shipments of commercial aircraft…without those transportation sector shipments, however, factory shipments were still 0.6% lower, as the value of shipments (and hence of “new orders”) of non-durable goods fell by $1.0 billion, or 0.4%, to $225.8 billion with a 2.1% drop in shipments from refineries and a 0.5% drop in shipments of food products accounting that decrease…without the decrease in the value of refinery shipments, the value of shipments of other non-durable goods would have been statistically unchanged…

meanwhile, the aggregate value of February factory inventories fell by $2.6 billion or 0.4 percent to $634.3 billion, their 8th nominal decrease in a row, following a January decrease of 0.2% that was reported as a 0.4% decrease last month….inventories of durable goods fell by $1.3 billion or 0.3 percent to $394.1 billion, $0.2 billion lower than was reported was reported two weeks ago but unchanged in terms of statistical significance, following a 0.2% decrease in January, which had been revised from the 0.1% reported last month in the advance report…..the value of non-durable goods’ inventories fell $1.3 billion or 0.5 percent to $240.17 billion, following a decrease of 1.0% in January…the value of inventories at petroleum refineries, down in value most of the year, drove the decrease in non-durable inventories, as they fell by $1.4 billion or 5.4% percent to $24.06 billion, which was undoubtedly mostly due to lower prices…producer prices for finished goods were down 0.6% in February, with producer prices for energy goods down 3.4%, so once factory inventories are adjusted for inflation in our national accounts data, they will likely show a real February increase on the order of 0.2%…

February Wholesale Sales Down 0.2%, Wholesale Inventories Down 0.5%

the February report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $427.6 billion, down 0.2 percent (+/-0.5%) from the revised January level, and 3.1% percent (+/-1.2%) lower than wholesale sales of February 2015… the January preliminary estimate was revised down $0.8 billion or 0.2 percent, leaving January’s sales 1.9% below the December level… February wholesale sales of durable goods were up 1.2 percent (+/-0.7%) from January and were down 3.4 percent (+/-1.8%) from a year earlier, with a 3.1% increase in wholesale sales of electrical and electronic goods leading the increase for the month, while wholesale sales of machinery fell 1.4%….wholesale sales of nondurable goods were down 1.6 percent (+/-0.7%) from January and were down 6.2 percent (+/-1.9%) from last February, with wholesale sales petroleum and petroleum products down 10.1% on lower prices…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 sold….

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this February report estimated that wholesale inventories were valued at a seasonally adjusted $583.3 billion at month end, a decrease of 0.5 percent (+/-0.4%) from the revised January level but 0.6 percent (+/-1.4%)* higher than February a year ago, with the January preliminary estimate revised downward $2.1 billion or almost 0.4%, and with the January change revised from 0.3% growth to a 0.2% contraction….inventories of durable goods were down 0.1 percent (+/-0.4%)* from January and were down 1.3 percent (+/-1.4%)* from a year earlier, with inventories of lumber and other construction materials down 1.6% on lower prices, while inventories of electrical and electronic goods were up 2.0% on lower sales…at the same time, the value of wholesale inventories of nondurable goods was down 1.1 percent (+/-0.4%) from January, but was up 3.7 percent (+/-1.9%) from last February, as the value of inventories of raw farm products fell 4.2% while wholesale inventories of drugs and drug store sundries fell 3.5%..

as you know, to approximate the effect of the change in wholesale inventories, valued here in current dollars, to the change in GDP, we must first convert these dollar figures into an approximation of the change in the quantity of goods that were inventoried…the BEA does that by deflating the value of each of the categories of inventories with the appropriate sub-index from the producer price index for the same month… however, since inventories are notoriously difficult to estimate without knowing the month that each subset of the total was inventoried, and since the BEA does not break out wholesale inventories from other business inventories in the GDP report, that means all we have to go on is the monthly wholesale data for the 4th quarter…thus we’ll just make a rough estimation by referring to the aggregate producer price index for February, which also includes January’s price changes, and adjust nominal inventories with them monthly…in February, producer prices for finished goods fell 0.6%, largely on a 3.4% decrease in wholesale energy prices, after January’s producer prices for finished goods fell 0.7% on a 5.0% drop in wholesale energy prices…that suggests that the January change in real wholesale inventories was an increase by about 0.5%, after which February real wholesale inventories rose by around 0.1%…that would suggest real wholesale inventories at the end of February were about 0.6% higher than they were at the end of the 4th quarter…our records and prior estimations of the change in wholesale inventories over the 4th quarter was of a real increase in wholesale inventories of about 0.5%…since the GDP calculation looks at the change in the growth of inventories, that means that wholesale inventories at the end of February look like they will be an incremental addition to 1st quarter GDP…

note that our estimate of an small increase in real inventories in the first quarter appears to differ from the assessment of the Atlanta Fed, who’s GDP now algorithm changed their forecast for the contribution of inventory investment to first-quarter real GDP growth from –0.4 percentage points to –0.7 percentage points after the release of this wholesale trade report…we don’t necessarily disagree with the Atlanta Fed’s take, because they certainly had to revise their previous forecast lower on the large January revision…the revision to January with this report changed that month’s nominal wholesale inventories from 0.3% growth to a 0.2% contraction….that in effect cut the January growth in real inventories in half, from roughly 1.0% to 0.5%…we assume Atlanta Fed’s prior -0.4 percentage point estimated contribution to GDP had indicated higher wholesale inventories were more than offset by lower factory & retail inventories…after this report, wholesale inventories wont be doing much offsetting of any lower inventories elsewhere…

Job Openings Down, Hiring and Job Quitting Up in February

the Job Openings and Labor Turnover Survey (JOLTS) report for February from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 159,000, from 5,604,000 in January to 5,445,000 in February, after January’s job openings were revised higher, from 5,541,000 to 5,604,000…February jobs openings were still 9.2% higher than the 5,131,000 job openings reported in February a year ago, as the job opening ratio expressed as a percentage of the employed fell to 3.7% in February from 3.8% in January but was still up from 3.5% a year ago…the greatest decreases in job openings were in health care and social assistance, where openings fell by 147,000 to 899,000, while job openings in private educational services rose by 48,000 to 131,000 (see table 1 for more details)…like most BLS releases, the press release for report is easy to understand 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 February, seasonally adjusted new hires totaled 5,422,000, up 297,000 from the revised 5,125,000 who were hired or rehired in January, as the hiring rate as a percentage of all employed rose from 3.6% to 3.8%, which was also up from the hiring rate of 3.6% in February a year earlier (details of hiring by industry since September are in table 2)….meanwhile, total separations also rose, by 73,000, from 4,977,000 in January to 5,050,000 in February, while the separations rate as a percentage of the employed remained unchanged at 3.5%, which was still up from the separations rate of 3.4% a year ago (see table 3)…subtracting the 5,050,000 total separations from the total hires of 5,422,000 would imply an increase of 372,000 jobs in February, somewhat more than the revised payroll job increase of 245,000 for February reported by the March establishment survey last week, implying that one of those surveys might be off by more than the expected +/-115,000 margin of error in these incomplete samplings

breaking down the seasonally adjusted job separations, the BLS finds that 2,950,000 of us voluntarily quit their jobs in February, up 99,000 from the revised 2,851,000 who quit their jobs in January, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.0% to 2.1% of total employment, which was also up from 1.9% a year earlier (see details in table 4)….in addition to those who quit, another 1,715,000 were either laid off, fired or otherwise discharged in February, up 11,000 from the revised 1,704,000 who were discharged in January, which left the discharges rate unchanged at 1.2% of all those who were employed during the month, also same as a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 385,000 in Febuary, down from 422,000 in January, 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

Mortgage Delinquencies Drop 12.57% in February While Mean Time in Foreclosure Rises to Record 1064 Days

the Mortgage Monitor for February (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 655,311 home mortgages, or 1.30% of all mortgages outstanding, remaining in the foreclosure process at the end of February, which was down from 659,237, which was also 1.30% of all active loans, that were in foreclosure at the end of January, and down from 1.72% of all mortgages that were in foreclosure in February of last year…these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and the February “foreclosure inventory” remains at the lowest percentage of homes that were in the foreclosure process since the fall of 2007… new foreclosure starts, which have been volatile from month to month, rose to 84,305 in February from 71,900 in January and from 77,208 in February a year ago; this was the highest number of new foreclosures in any month since March 2015, when 92,164 were foreclosed on…over the past year, the average of new foreclosure starts monthly remains at a level about one-third higher than the average number of new foreclosures we saw monthly in the precrisis year of 2005…

in addition to homes in foreclosure, BKFS data also showed that  2,251,899 mortgages, or 4.45% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure at the end of February, down from the 5.09% of homeowners with a mortgage who were more than 30 days behind in January, and down from the mortgage delinquency rate of 5.30% in February a year earlier…of those who were delinquent in February, 772,441 home owners, or 1.53% of those with a mortgage, were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month, which was also down from 831,284 such “seriously delinquent” mortgages in January…combining the total delinquent mortgages with those in foreclosure, we find that a total of 2,907,210 mortgage loans, or 5.75% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of February, and that 2.82% of all homeowners were in serious trouble, ie, either “seriously delinquent” or already in foreclosure at month end…

the first graph below, from page 5 of the Mortgage Monitor, show the mortgage delinquency rate, or the percentage of mortgages at least one mortgage payment overdue but not in foreclosure, at the end of each month since the beginning of 2005…as noted on the graph, at 4.45%, the national mortgage delinquency rate is now at the lowest its been since April 2007…that’s down by much more than half from January 2010, when 10.57% of all mortgages nationally that weren’t yet in foreclosure were behind by at least one house payment….before the mortgage crisis, the delinquency rate was generally in a range between 3.75% and 4.25%, with the seasonal highs typically in December…

February 2016 LPS delinquency rate graphs

the next graph, also from page 5 of the Mortgage Monitor, shows the monthly percentage change in the mortgage delinquency rate over that same span…as they note on the chart, the 12.57% decrease in mortgage delinquencies we saw in this February report was the largest monthly drop in mortgage delinquencies in 10 years, percentage wise …what they don’t note is that followed a 6.62% increase in mortgage delinquencies in January, the first time that mortgage delinquencies had increased in January in at least 5 years, and possibly the largest increase in any January, when mortgage delinquencies normally fall, as homeowners catch up on their overdue bills after Christmas spending…what appears to have caused both aberrations was that January 31st fell on a Sunday, and hence mortgage payment checks that would have arrived January 30th or the 31st were not processed on the weekend, leaving those mortgages technically delinquent at the end of January…. that “check in the mail” scenario did not repeat in February, however, since the 29th fell on a Monday, and as a result of having two checks processed during the month, those January delinquent mortgages thus “cured” in February…

February 2016 LPS delinquency rate graphs no 2

the next graph, also from page 5 of the Mortgage Monitor, shows the monthly percentage change in the serious delinquency rate over the same period, beginning in 2005….as we noted earlier, the number of seriously delinquent mortgages had dropped from 831,284 in January to 772,441 in February, a 7.1% drop, which BKFS notes on the graph was the largest drop in serious delinquencies in 12 months and the 2nd largest drop in 5 years…but once again, that had followed a 2.9% spike in serious delinquencies in January, again at a time of year when such serious delinquencies are normally falling…taking January and February together, the drop in both the simple delinquencies and the more serious ones was not outside the range of the normal drop in delinquencies that would normally occur over the first two months of the year…

February 2016 LPS 90 day delinquency change

finally, we’re including below that part of the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from the bottom part of page 16 of the pdf, even though the 2015 data has now been cycled off this month (for monthly 2015 data, see here)….the columns in the table below show the total active mortgage loan count nationally for each month shown, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each January shown going back to January 2005….in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…the average length of delinquency for those who have been more than 90 days delinquent without foreclosure has fallen from the April 2015 record of 536 days and is now at 489 days, while the average time for those who’ve been in foreclosure without a resolution has increased again and at 1064 days has now topped the record high last set in November… that means that the average homeowner who is in foreclosure now has been there nearly three years, which, considering that new foreclosure starts are less than 30 days old, suggests that many foreclosures started early in the crisis are still not yet completed…

February 2016 LPS loan counts and days delinquent table

(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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