July’s trade deficit and factory inventories

this week’s regular monthly economic releases included the July report on our International Trade, the Full Report on Manufacturers’ Shipments, Inventories and Orders for July, and the July report on Wholesale Trade, Sales and Inventories, all from the Census Bureau, and the and the Consumer Credit Report for July from the Fed, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $18.5 billion, or at a 5.9% annual rate, as non-revolving credit expanded at a 6.9% rate to $2,759.3 billion and revolving credit outstanding rose at a 3.2% rate to $994.5 billion…the main privately issued report released this week was the August Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 55.3% in August, up from 53.9% in July, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in August than in July….in addition, in a once a year report, the BLS released the Current Employment Statistics Preliminary Benchmark Revision, which estimated that 95,000 more payroll jobs were created in the year ending March 2017 than had been reported in the monthly Employment Situation reports we review monthly, more than half of which were in construction…however, this preliminary estimate will not yet affect jobs totals as they’re being reported the rest of this year; that will not happen until the final benchmark revision is published with the January 2018 employment report in February 2018….

July Trade Deficit Inches Up on Lower Exports of Cars and Consumer Goods

our trade deficit rose by 0.2% in July as the value of both our exports and imports decreased, but our exports decreased a bit more….the Census report on our international trade in goods and services for July indicated that our seasonally adjusted goods and services trade deficit increased by $0.1 billion to $43.7 billion in July from a revised June deficit of $43.6 billion…after rounding, the value of our July exports fell by $0.6 billion to $194.4 billion on a $0.4 billion decrease to $128.6 billion in our exports of goods and a $0.1 billion decrease to $65.8 billion in our exports of services, while our imports fell by $0.4 billion to $238.1 billion on a $0.5 billion decrease to $193.9 billion in our imports of goods while our imports of services rose $0.1 billion to $44.1 billion…export prices were on average 0.4% higher in July, so the relative change in real July exports would be lower than the nominal dollar amount by that percentage, while import prices were 0.1% higher, meaning that relative real imports were smaller than the nominal dollar values reported here by that small percentage…

the decrease in our July exports was due to lower exports of consumer goods and automotive products, which was partially offset by higher exports of capital goods….referencing the Full Release and Tables for July (pdf), in Exhibit 7 we find that our exports of consumer goods fell by $670 million to $15,747 million on a $457 million decrease in our exports of cell phones and a $241 million decrease in our exports of gem diamonds, and that our exports of automotive vehicles, parts, and engines fell by $597 million to $12,967 million on a $986 million decrease in our exports of new and used passenger cars…in addition, our exports of industrial supplies and materials fell by $192 million to $37,525 million on a $597 million decrease in our exports of nonmonetary gold, and our exports of other goods not categorized by end use fell by $286 million to $5,294 million…partially offsetting those decreases, our exports of capital goods rose by $961 million to $44,884 million on an increase of $1,092 million in our exports of civilian aircraft and a $304 million increase in our exports of civilian aircraft engines, while our exports of foods, feeds and beverages rose by $352 million to $12,185 million on a $150 million increase in our exports of soybeans…’

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that lower imports of automobiles and crude oil were responsible for the $0.4 billion drop in our goods imports, because our imports of capital goods rose at the same time…our imports of automotive vehicles, parts and engines fell by $827 million to $29,375 million on a $830 million decrease in our imports of passenger cars, and our imports of industrial supplies and materials fell by $714 million to $40,589 million, as our imports of crude oil fell by $948 million while our imports of iron and steel mill products fell by $336 million…at the same time, our imports of consumer goods fell by $2 million to $48,760 million because our imports of pharmaceuticals fell by $1,097 million, and our imports of other goods not categorized by end use fell by $360 million to $7,942 million…..partially offsetting the decreases in those categories, our imports of capital goods rose by $1272 million to $54,142 million on an increase of $569 million in our imports of computers and a $606 million increase in our imports of computer accessories, and our imports of foods, feeds, and beverages rose by $196 million to $11,651 million on a $101 million increase in our imports of meat…

to gauge the impact of July trade in goods on 3rd quarter GDP 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 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 compute that 2nd quarter real exports of goods averaged 125,251 million monthly in 2009 dollars, while inflation adjusted July exports were at 126,385 million in the same 2009 dollar quantity index representation… annualizing the change between the two figures, we find that July’s real exports are running at a 3.7% annual rate above those of the 2nd quarter, or at a pace that would add about 0.30 percentage points to 3rd quarter GDP if continued through August and September…..in a similar manner, we find that our 2nd quarter real imports averaged 187,682 million monthly in chained 2009 dollars, while inflation adjusted July imports were at 187,985 million…that would indicate that so far in the 3rd quarter, we have seen a small increase at annual rate of a bit more than 0.6% in our real imports from those of the 2nd 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 0.6% rate would subtract about 0.09 percentage points from 3rd quarter GDP….hence, if the July trade deficit is maintained throughout the 3rd quarter, our improving balance of trade in goods over that of the 2nd quarter would add about 0.21 percentage points to the growth of 2nd quarter GDP….note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don’t have easy access to all their price changes…

Factory Shipments Up 0.3% in July, Factory Inventories Up 0.2%

the 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 $15.8 billion or 3.3 percent to $466.4 billion in July, following a increase of 3.2% in June, which was revised from the 3.0% increase 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 advance report on durable goods we reported on two weeks ago…in that respect, this report showed that new orders for manufactured durable goods decreased by $16.8 billion or 6.8 percent to $228.9 billion, virtually unchanged from the previously published decrease…

more importantly then, this report indicated that the seasonally adjusted value of July factory shipments rose for the seventh time in eight months, increasing by $1.6 billion or 0.3 percent to $474.3 billion, following a 0.1% increase in June…shipments of durable goods were up by $0.6 billion or 0.2 percent to $236.9 billion in July, revised from the previously published $1.0 billion, 0.4% increase, which followed a statistically insignificant decrease in June….meanwhile, the value of shipments (and hence of “new orders”) of non-durable goods rose by $1.0 billion or 0.4 percent to $237.4 billion, as a $0.9 billion or 2.2 percent increase to $41.3 billion in the value of shipments of petroleum and coal products accounted for most of the increase…

meanwhile, the aggregate value of July factory inventories rose for the eighth time in the past nine months, increasing by $1.4 billion or 0.2 percent to $651.6 billion, following a 0.3% increase in June….July inventories of durable goods increased in value by $1.3 billion or 0.3 percent to $398.7 billion, virtually unchanged from what was reported in the advance report two weeks ago….at the same time, the value of non-durable goods’ inventories increased $0.2 billion or 0.1 percent to $252.8 billion, on a $0.3 billion or 0.8 percent increase to $34.5 billion in the value of coal and petroleum inventories…

to gauge the effect of these July factory inventories on 1st 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 $227,793 million; the value of work in process inventories rose by 0.5% to $201,371 million, and materials and supplies inventories were valued 0.1% higher at $222,396 million…the July producer price index reported that prices for finished goods decreased 0.1%, prices for intermediate processed goods were also 0.1.% lower, while prices for unprocessed goods averaged 0.4% lower….assuming similar valuations for inventories, that would suggest that July’s real finished goods inventories were roughly 0.3% higher, real inventories of intermediate processed goods were 0.6% higher, and real raw material inventory inventories were 0.5% higher, all following a second quarter that saw total inventories virtually unchanged.. 

 

(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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