November’s trade deficit, factory inventories, et al…

The major economic reports released this past week were the November report on our International Trade and the Full Report on Manufacturers’ Shipments, Inventories and Orders for November, both from the Census Bureau….those reports had originally been scheduled for Monday and Tuesday of the 2nd week of January, and were both postponed until this week due to the government shutdown…meanwhile, the December report on our International Trade and the Full Report on December Manufacturers’ Shipments, Inventories and Orders, which both had originally been scheduled to be released this week, were postponed, with no revised release date for either yet scheduled…so far, we’ve seen nothing in the rescheduled releases that indicates either the Census or the BEA will be “catching up” on the reports they’ve postponed, although the BEA has announced that they will skip the advance report on 4th quarter GDP altogether, and release an “initial” 4th quarter GDP estimate on February 28th, the previously scheduled release date for the 2nd estimate..

Meanwhile, the Fed released the Consumer Credit Report for December on schedule, and it indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $16.5 billion, or at a 5.0% annual rate in December, as non-revolving credit expanded at a 6.0% rate to $2,813.1 billion and revolving credit outstanding rose at a 2.0% rate to $1,044.6 billion…for the year, consumer credit expanded by 4.9%, as revolving credit grew by 2.8% and nonrevolving credit grew by 5.6%…

Privately issued reports released this week included the January Non-Manufacturing Report On Business from the Institute for Supply Management, which saw their NMI (non-manufacturing index) come in at 56.7%, down from 58.0% in November, indicating that a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in January than did in December, and the Mortgage Monitor for December (pdf) from Black Knight Financial Services, which indicated that 3.88% of all US mortgages were delinquent in December, up from 3.71% in November but down from 4.71% in December a year ago, and that 0.52% of all mortgages were in the foreclosure process at the end of the month for the 4th straight month, down from the 0.65% of mortgages that were in foreclosure in December a year ago…

Trade Deficit Falls 11.5% in November on Lower Fuel Costs, Consumer Imports

Our trade deficit fell by 11.5% in November as the value of both our exports and our imports decreased, but our imports decreased by much more….the Census report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit fell by $6.4 billion to $49.3 billion in November, from an October deficit of $55.7 billion, which was revised from the $55.5 billion trade deficit reported for October 2 months ago…the value of our November exports fell by $1.3 billion to $209.9 billion on a $1.2 billion decrease to $140.3 billion in our exports of goods and a decrease of $0.1 billion to $69.5 billion in our exports of services, while the value of our imports fell $7.7 billion to $259.2 billion on a $7.9 billion decrease to $211.9 billion in our imports of goods, which was slightly offset by an increase of $0.2 billion to $47.3 billion in our imports of services…export prices were on average 0.8% lower in November, so the change in our real November exports would be greater than the nominal value of them by that percentage, while import prices averaged 1.9% lower, meaning real imports were greater than the nominal dollar values reported here by that percentage….

The $1.3 billion decrease in the value of our November exports of goods largely resulted from lower exports of industrial supplies and consumer goods, which was partially offset by greater exports of capital goods…referencing the Full Release and Tables for November (pdf), in Exhibit 7 we find that the value of our exports of industrial supplies and materials fell by $1,362 million to $45,878 million on a $576 million decrease in our exports of petroleum products other than fuel oil and a $464 million decrease in our exports of nonmonetary gold, and that our exports of consumer goods fell by $903 million to $17,046 million on a $526 million decrease in our exports of gem diamonds and a $420 million decrease in our exports of pharmaceuticals…in addition, our exports of automotive vehicles, parts, and engines fell by $375 million to $12,336 million on a $220 million decrease in our exports of vehicle accessories other than bodies, engines and tires, and our exports of other goods not categorized by end use fell by $47 million to $5,604 million…partially offsetting the decreases in those export categories, our exports of capital goods rose by $1,411 million to $48,375 million on a $996 million increase in our exports of civilian aircraft and a $386 million increase in our exports of telecommunications equipment, and our exports of foods, feeds and beverages rose by $61 million to $10,446 million…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports, and shows that lower imports of consumer goods and industrial supplies and materials accounted for the November decrease in our imports…our imports of consumer goods fell by $4,279 million to $53,128 million on a $2,294 million decrease in our imports of cellphones, a $419 million decrease in our imports of artwork, antiques and other collectibles, a $275 million decrease in our imports of pharmaceuticals, and a $270 million decrease in our imports of apparel and household textile goods other than those made of wool or cotton…at the same time, the value of our imports of industrial supplies and materials fell by $3,417 million to $45,997 million as our imports of petroleum products other than fuel oil fell by $1,367 million, our imports of fuel oil fell by $769 million and our imports of crude oil fell by $698 million, our imports of foods, feeds, and beverages fell by $146 million to $12,153 million, and our imports of other goods not categorized by end use fell by $597 million to $9,549 million….offsetting the decreases in those import categories, our imports of capital goods rose by $345 million to $57,254 million on a $404 million increase in our imports of semiconductors, and our imports of automotive vehicles, parts and engines rose by $243 million to $32,083 million on a $267 million increase in our imports of trucks, buses, and special purpose vehicles….

The Full Release and Tables also gives us details on our balance of trade with selected countries:

The November figures show surpluses, in billions of dollars, with South and Central America ($4.8), Hong Kong ($2.6), United Kingdom ($0.9), Singapore ($0.8), and Brazil ($0.7). Deficits were recorded, in billions of dollars, with China ($35.4), European Union ($13.8), Mexico ($6.8), Japan ($5.7), Germany ($5.6), Italy ($2.7), South Korea ($1.9), India ($1.7), Taiwan ($1.6), Saudi Arabia ($1.5), France ($1.3), OPEC ($1.2), and Canada ($0.8).

  • The deficit with China decreased $2.8 billion to $35.4 billion in November. Exports decreased $0.1 billion to $7.4 billion and imports decreased $2.9 billion to $42.8 billion. 
  • The deficit with Canada decreased $1.3 billion to $0.8 billion in November. Exports decreased $0.4 billion to $24.5 billion and imports decreased $1.7 billion to $25.3 billion. 
  • The deficit with Taiwan increased $0.4 billion to $1.6 billion in November. Exports decreased $0.3 billion to $2.5 billion and imports increased $0.1 billion to $4.1 billion.

To gauge the impact of both October’s and November’s trade in goods on the eventual 4th 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 2012 dollars, the same inflation adjustment used by the BEA to compute the impact of trade figures for GDP, with the exception that they are not annualized here….from that table, we can estimate that 3rd quarter real exports of goods averaged 149,417 million monthly in 2012 dollars, while similarly inflation adjusted October and November exports were at 149,595 million and 150,007 million respectively in that same 2012 dollar quantity index representation…. annualizing the change between the average real exports of the two quarters, we find that the 4th quarter’s real exports of goods are rising at a 1.03% annual rate from those of the 3rd quarter, or at a pace that would add about 0.09 percentage points to 4th quarter GDP if continued at the same pace through December…..in a similar manner, we find that our 3rd quarter real imports of goods averaged 234,772.7 million monthly in chained 2012 dollars, while inflation adjusted October and November imports were at 237,886 million and 230,829 million in 2012 dollars respectively…that would indicate that so far in the 4th quarter, real imports have been shrinking at annual rate of 0.706% from those of the 3rd quarter…since imports are subtracted from GDP because they represent the portion of the consumption and investment components of GDP that occurred during the quarter that was not produced domestically, their decrease at a 0.706% rate would conversely add about 0.08 percentage points to 4th quarter GDP….hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our improving balance of trade in goods would add about 0.17 percentage points to the growth of 4th quarter GDP….(note that we have not computed the impact on GDP of the usually less volatile change in services here, mostly because the Census does not provide inflation adjusted data on those, and we don’t have easy source of all their price changes..)

Factory Shipments Down 0.6% in November, Factory Inventories Down 0.1%, Both on Lower Prices

The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for November from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $3.1 billion or 0.6 percent to $499.2 billion in November, following a decrease of 2.1% to $502.26 billion in October, which was revised from the 2.1% decrease to $502.7 billion that was reported for October two months ago….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 revised updates to the November advance report on durable goods which was released on December 21st…on those durable goods revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we’ll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in November, down two consecutive months, decreased $3.1 billion or 0.6 percent to $499.2 billion, the U.S. Census Bureau reported today.  This followed a 2.1 percent October decrease.  Shipments, down two consecutive months, decreased $3.2 billion or 0.6 percent to $505.1 billion.  This followed a 0.1 percent October decrease.  Unfilled orders, down two consecutive months, decreased $1.8 billion or 0.1 percent to $1,181.5 billion.  This followed a 0.2 percent October decrease.  The unfilled orders‐to‐shipments ratio was 6.60, down from 6.68 in October.  Inventories, down following twenty‐four consecutive monthly increases, decreased $1.0 billion or 0.1 percent to $681.1 billion.  This followed a 0.2 percent October increase.  The inventories‐to‐shipments ratio was 1.35, up from 1.34 in October.
  • New orders for manufactured durable goods in November, up following two consecutive monthly decreases, increased $1.8 billion or 0.7 percent to $250.8 billion, down from the previously published 0.8 percent increase.  This followed a 4.3 percent October decrease.  Transportation equipment, up three of the last four months, drove the increase, $2.5 billion or 3.0 percent to $87.0 billion.  New orders for manufactured nondurable goods decreased $4.9 billion or 1.9 percent to $248.4 billion.
  • Shipments of manufactured durable goods in November, up three of the last four months, increased $1.8 billion or 0.7 percent to $256.7 billion, unchanged from the previously published increase.  This followed a 0.3 percent October decrease.  Transportation equipment, also up three of the last four months, drove the increase, $1.8 billion or 2.1 percent to $89.5 billion.  Shipments of manufactured nondurable goods, down following eight consecutive monthly increases, decreased $4.9 billion or 1.9 percent to $248.4 billion.  This followed a 0.1 percent October increase.  Petroleum and coal products, also down following eight consecutive monthly increases, drove the decrease, $5.5 billion or 9.3 percent to $53.2 billion.
  • Unfilled orders for manufactured durable goods in November, down two consecutive months, decreased $1.8 billion or 0.1 percent to $1,181.5 billion, unchanged from the previously published decrease.  This followed a 0.2 percent October decrease.  Transportation equipment, also down two consecutive months, drove the decrease, $2.5 billion or 0.3 percent to $812.4 billion. 
  • Inventories of manufactured durable goods in November, up twenty‐two of the last twenty‐three months, increased $1.6 billion or 0.4 percent to $413.7 billion, up from the previously published 0.3 percent increase.  This followed a 0.2 percent October increase.  Primary metals, up twenty‐four of the last twenty‐ five months, led the increase, $0.3 billion or 0.9 percent to $36.1 billion.  Inventories of manufactured nondurable goods, down following sixteen consecutive monthly increases, decreased $2.6 billion or 1.0 percent to $267.4 billion.  This followed a 0.1 percent October increase.  Petroleum and coal products, down two consecutive months, drove the decrease, $3.1 billion or 7.3 percent to $39.8 billion.

To gauge the impact of November factory inventories on 4th 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 November’s finished goods inventories was 0.1% lower at $236,677 million; the value of work in process inventories was 0.5% lower at $207,096 million, and materials and supplies inventories were valued 0.1% higher at $237,283 million…the producer price index for November indicated that prices for finished goods decreased 0.4%, that prices for intermediate processed goods were 0.7% lower, and that prices for unprocessed goods were on average 5.3% lower….assuming similar valuations for like types of inventories, those price changes would suggest that November’s real finished goods inventories were up about 0.3%, that real inventories of intermediate processed goods were around 0.2% greater, and real raw material inventories were 5.2% greater…those inventory changes follow an October report that indicated real finished goods inventories were about 0.3% lower, that real inventories of intermediate processed goods were 1.1% lower, and that real raw material inventory inventories were about 3.3% lower…since real factory inventories in the 3rd quarter were substantial higher, any inventory increases in the 4th quarter that are smaller than those will subtract from the growth of 4th quarter GDP…

 

 

(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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