October’s producer price index; September’s job openings & labor turnover and wholesale inventories

Major agency reports that were released the past week included the September Producer Price Index and the Job Openings and Labor Turnover Survey (JOLTS) for September, both from the Bureau of Labor Statistics, and the August report on Wholesale Trade, Sales and Inventories from the Census Bureau, a report that we watch for inventories…in addition, the Fed released the Consumer Credit Report for September, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $11.0 billion, or at a 3.3% annual rate, as non-revolving credit expanded at a 4.7% rate to $2,908.9 billion while revolving credit outstanding shrunk at a 0.4% rate to $1,041.1 billion….

Privately issued reports included the October Non-Manufacturing Report On Business from the Institute for Supply Management, which reported their NMI (non-manufacturing index) fell to 62.5% from 65.2% in September, indicating a smaller but still substantial plurality of service industry purchasing managers reported expansion in various facets of their business in October, and the Mortgage Monitor for September from Black Knight Financial Services, which indicated that 3.97% of all mortgages were delinquent in September, up from 3.50% in August but down from 4.40% in September of 2017, and that 0.52% of all mortgages were in the foreclosure process in September, down from from 0.54% in August and down from 0.70% a year ago….the September increase in mortgage delinquencies was the largest monthly increase in nearly a decade and was particularly elevated in regions of the country where properties have experienced hurricane damage, even as all 50 states saw delinquency increases in September

Producer Prices Rose 0.6% in October on Higher Prices for Fuel, Margins for Trade Services

The seasonally adjusted Producer Price Index (PPI) for final demand was 0.6% higher in October, as prices for finished wholesale goods were 0.6% higher, while margins of final services providers increased by 0.7%…that followed a September report that indicated the PPI was 0.2% higher, with prices for finished wholesale goods 0.1% lower and margins of final services providers 0.3% higher, an August report that showed the producer price index was 0.1% lower, with prices for finished wholesale goods unchanged while margins of final services providers decreased by 0.1%, and a revised July report that indicated the PPI was unchanged, with prices for both finished wholesale goods and for margins of final services providers also unchanged….on an unadjusted basis, producer prices are now 2.9% higher than a year ago, up from the year over year increase of 2.8% that was indicated by last month’s report…meanwhile, the core producer price index, which excludes food, energy and trade services, was up by 0.2% for the month, and is now 2.9% higher than in October a year ago…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 0.6% higher in October, after being 0.1% lower in September, being unchanged in July and August, but after rising by 0.2% in June and by 0.9% in May…the price index for wholesale energy was 2.7% higher in September after falling 0.8% in September, rising 0.4% in August, and falling a revised 0.8% in July and rising a revised 1.5% in June, while the price index for wholesale foods rose 1.0%, and the index for final demand for core wholesale goods (excluding food and energy) was unchanged….wholesale energy prices rose largely on a 7.6% increase in the wholesale price for gasoline and a 5.4% increase in wholesale prices for diesel fuel …the wholesale food price index, meanwhile, included a 10.6% increase in wholesale prices for fresh eggs and an 9.5% increase in wholesale prices for fresh and dry vegetables….among wholesale core goods, wholesale prices for  industrial chemicals rose 3.2% while wholesale prices for electronic components and accessories fell 2.4% and wholesale prices for passenger cars fell 1.0%..

At the same time, the index for final demand for services rose 0.7%, after rising 0.3% in September, falling 0.1% in August, being unchanged in July, and rising 0.3% in June, 0.3% in May, 0.2% in April and 0.3% in March, as the October index for final demand for trade services rose 1.6%, the index for final demand for transportation and warehousing services rose 0.6%, and the core index for final demand for services less trade, transportation, and warehousing services rose 0.2%….among trade services, seasonally adjusted margins for food and alcohol retailers rose 2.8%, margins for machinery and equipment wholesalers rose 1.8%, and margins paper and plastics products wholesalers rose 5.9%… among transportation and warehousing services, margins  for airline passenger services rose 1.1% and margins for rail transportation of passengers rose 2.5%…among the components of the core final demand for services index, the index for passenger car rentals fell 5.4% while margins for membership dues, admissions and recreation facility use rose 3.0%..

This report also showed the price index for intermediate processed goods rose 0.8%, after being unchanged in August and September, but after rising a revised 0.1% in July, and a revised 0.6% in June….the price index for intermediate energy goods rose 2.6%, as refinery prices for gasoline rose 7.6% and producer prices for residual fuels rose 7.3%…prices for intermediate processed foods and feeds rose 0.4%, as the price index for meat rose 2.4% and dairy prices rose 1.2%…meanwhile, the core price index for processed goods for intermediate demand less food and energy was also 0.4% higher on a 3.8% increase in the index for basic organic chemicals and a 4.3% increase in the price index for nitrogenates….prices for intermediate processed goods are now 5.9% higher than in October a year ago, now the 23rd consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016….

Meanwhile, the price index for intermediate unprocessed goods rose 3.6% in October, after rising 1.7% in September, falling 5.8% in August, rising a revised 2.1% in July, and falling a revised 1.0% in June….that was as the October price index for crude energy goods rose 3.6% as crude oil prices rose 7.6%, and as the price index for unprocessed foodstuffs and feedstuffs rose 5.8%, as producer prices for slaughter hogs rose 46.3% and producer prices for raw milk rose 9.4%…at the same time, the index for core raw materials other than food and energy materials was unchanged, as prices for nonferrous metal ores rose 2.6% while prices for aluminum base scrap fell 8.0%…this raw materials index is now up by 7.8% from a year ago, up from the 4.3% year over year increase that we saw in September…

Lastly, the price index for services for intermediate demand rose 0.4% in October, after rising 0.5% in September, 0.1% in August, a revised 0.2% in July and a revised 0.2% in June…the price index for intermediate trade services was 1.5% higher, as margins for intermediate metals, minerals, and ores wholesalers rose 7.8% and margins for margins for paper and plastics products wholesalers rose 5.9%…the index for transportation and warehousing services for intermediate demand rose 0.3%, as the index for air transportation of passengers (partial) rose 1.0% and the index for pipeline transportation of petroleum products rose 0.8%…meanwhile, the core price index for intermediate services less trade, transportation, and warehousing was 0.2% higher, as the index for broadcast and network television advertising time sales rose 5.0% and the index for services related to securities brokerage and dealing (partial) rose 1.7%….over the 12 months ended in October, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 3.2% higher than it was a year ago…  

Job Openings, Hiring, Layoffs and Job Quitting all Lower in September

The Job Openings and Labor Turnover Survey (JOLTS) report for September from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 284,000, from 7,293,000 in August to 7,009,000 in September, after record August job openings were revised 157,000 higher, from 7,136,000 to 7,293,000…September’s jobs openings were still 12.5% higher than the 6,229,000 job openings reported in September a year ago, as the job opening ratio expressed as a percentage of the employed fell from a record high 4.7% in August to 4.5% in September, while it was up from 4.1% in September a year ago…there were wide differences in job opening changes between industries, however, from the 118,000 job opening decrease to 1,256,000 openings in the broad professional and business services sector, to the 60,000 job opening increase to 961,000 openings in bars and restaurants (see table 1 for more details)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are 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 September, seasonally adjusted new hires totaled 5,744,000, down by 162,000 from the revised 5,906,000 who were hired or rehired in August, as the hiring rate as a percentage of all employed fell to 3.8% from 4.0% in August, while it was still up from the 3.7% rate in September a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations fell by 112,000, from 5,779,000 in August to 5,667,000 in September, while the separations rate as a percentage of the employed remained unchanged at 3.6%, the  same as in September a year ago (see table 3)…subtracting the 5,667,000 total separations from the total hires of 5,744,000 would imply an increase of 77,000 jobs in September, somewhat less than the revised payroll job increase of 118,000 for September reported in the October establishment survey last week, but well within the expected +/-115,000 margin of error in these incomplete samplings

Breaking down the seasonally adjusted job separations, the BLS finds that 3,601,000 of us voluntarily quit our jobs in September, down from the revised 3,648,000 who quit their jobs in August, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.4% of total employment, while it was still up from 2.2% a year earlier (see job details in table 4)….in addition to those who quit, another 1,700,000 were either laid off, fired or otherwise discharged in September, down by 90,000 from the revised 1,790,000 who were discharged in August, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was also down from the discharges rate of 1.2% a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 365,000 in September, up from 341,000 in August, for an ‘other separations rate’ of 0.2%, which unchanged from August and from September of last year….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

September Wholesale Sales Up 0.2%, Wholesale Inventories Up 0.4% 

The September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $511.2 billion, up 0.2 percent (±0.5 percent)* from the revised August level, and up 7.8 percent (±3.5 percent) from the wholesale sales of September 2017… the August preliminary estimate was revised down to $510.37 billion from the $511.1 billion in wholesale sales reported last month, which thus revised the July to August change in sales from +0.8% to +0.7%….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 produced or finally sold….

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted $644.6 billion at month end, up 0.4 percent (±0.4 percent)* from the revised August level and 5.2 percent (±4.0 percent) higher than in September a year ago….August’s inventory value was revised from $642.7 billion to $642.2 billion, which meant that the July to August percent change was revised from the advance estimate of +1.0 percent to +0.9 percent…

In the advance report on 3rd quarter GDP of two weeks ago, wholesale inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release…that report estimated that our seasonally adjusted wholesale inventories were valued at $644.081 billion at the end of September, up from $641.959 billion in August….that’s $0.475 billion less than the $644.556 billion for the end of the quarter that this report shows, which would imply that the quarterly change in 2nd quarter inventories was underestimated at roughly a $1.9 billion annual rate…assuming there’s no revision in the inflation adjustment to those inventories, that would mean that the growth rate of 2nd quarter GDP was underestimated by around 0.03 percentage points based just on what this report shows…

 

(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 picked from the aforementioned GGO posts, contact me…)      

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