November’s consumer and producer prices, and retail sales; October’s business inventories

Major reports released this week included the November Consumer Price Index, the November Producer Price Index, and the November Import-Export Price Index, all from the Bureau of Labor Statistics, and the Retail Sales report for November and the Business Sales and Inventories report for October, both from the Census Bureau….in addition, this week also saw the Mortgage Monitor for October from Black Knight Financial Services, which indicated that 3.39% of all mortgages were delinquent in October, down from 3.53% in September and down from 3.64% in October of 2018, and that 0.48% of all mortgages were in the foreclosure process, the same percentage as were in foreclosure in September but down from the 0.52% that were in foreclosure a year ago…

Consumer Prices Rose 0.3% in November on Higher Prices for Energy, Rent & Services

The consumer price index rose 0.3% in November, as higher prices for energy, rent, used cars, and health care services were only slightly offset by lower prices for fresh fruit and airline fares…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.3% in November after rising 0.4% in October, being unchanged in September, rising 0.1% in August, rising 0.3% in July, rising 0.1% in June, rising 0.1% in May, rising 0.3% in April, rising 0.4% in March, rising 0.2% in February, and after they had been unchanged in January, in December and last November…the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, actually fell from 257.346 in October to 257.208 in November, which left it statistically 2.0513% higher than the 252.038 index reading of November of last year, which is reported as a 2.1% year over year increase….with prices for energy a major contributor to the overall index increase, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, as the unadjusted core price index rose from 265.059 to 265.108, which left the core index 2.3168% ahead of its year ago reading of 259.105, which is reported as a 2.3% year over year increase, same as was reported for October…

The volatile seasonally adjusted energy price index rose 0.8% in November, after rising 2.7% in October, falling 1.4% in September. falling 1.9% in August. rising 1.3% in July, falling 2.3% in June, falling 0.6% in May, rising 2.9% in April, rising 3.5% in March, rising 0.4% in February, falling 3.1% in January, falling 2.6% in December, and falling by 2.8% last November, and hence is still 0.6% lower than in November a year ago…the price index for energy commodities was 1.1% higher in November, while the index for energy services was 0.4% higher, after rising 1.8% in October….the energy commodity index was up 1.1% due to a 1.1% increase in the price of gasoline, the largest component, and a 1.4% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.1% higher…within energy services, the price index for utility gas service rose 1.1% after rising 2.4% in October and is now 1.1% higher than it was a year ago, while the electricity price index rose 0.3% after rising 1.6% in October….energy commodities are still averaging 1.5% lower than their year ago levels, with gasoline prices averaging 1.2% lower than they were a year ago, while the energy services price index is now 0.6% higher than last November, as electricity prices are now 0.5% higher than a year ago…

The seasonally adjusted food price index rose 0.1% October, after rising 0.2% October, 0.1% September, being unchanged in June, July & August, rising 0.3% in May, falling 0.1% in April, but after rising 0.3% in March, 0.4% in February, 0.2% in January, 0.3% in December, and by 0.2% last November, as the price index for food purchased for use at home was 0.1% higher in October, while the index for food bought to eat away from home was 0.2% higher, as prices at fast food outlets rose 0.1% and prices at full service restaurants rose 0.3% while food prices at employee sites and schools were on average 0.1% higher…

In the food at home categories, the price index for cereals and bakery products was 0.1% lower as average bread prices rose 1.3% while the price index for breakfast cereal fell 0.7%, rice prices fell 0.7% and the index for crackers and cracker products fell 2.3%…at the same time, the price index for the meats, poultry, fish, and eggs group was 0.3% higher, as average pork prices rose 1.3% while the fish and seafood price index fell 0.4%…in addition, the seasonally adjusted index for dairy products was 0.6% higher, as average prices for fresh while milk rose 0.4% and cheese prices rose 0.6%…on the other hand, the fruits and vegetables index was 0.7% lower on a 1.3% decrease in the price index for canned vegetables and a 1.6% decrease in the price index for fresh fruits, led by a 5.5% drop in orange prices…meanwhile, the beverages index was 0.6% higher, as prices for coffee rose 1.7% and carbonated drink prices were 2.3% higher….lastly, the index for the ‘other foods at home’ category was unchanged, as the price index for prepared salads rose 1.4% and peanut butter prices rose 1.2%, while prices for sauces and gravies fell 1.4% and prices of olives, pickles and relishes averaged 2.5% lower….the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall…since last November, the price of lettuce, which is now up by 14.5%, is the only food line item that has seen a price change of more than 10% over the past year…

Among the seasonally adjusted core components of the CPI, which rose by 0.2% November after rising by 0.2% October, 0.1% in September, 0.3% in August, 0.3% in July, 0.3% in June, 0.1% in May, 0.1% in April, 0.1% in March, 0.1% in February, and by 0.2% for each of  the five months prior to that, the composite price index of all goods less food and energy goods was unchanged in November, while the more heavily weighted composite for all services less energy services was 0.3% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust November’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.1% lower, as the price index for window and floor coverings fell 2.4% and the price index for dishes and flatware fell 4.1% while the index for laundry appliances rose 2.1%….on the other hand, the apparel price index was 0.1% higher as a 3.9% decrease in the price index for boys apparel and a 1.9% decrease in the price index for men’s apparel was more than offset by a 1.2% increase in the price index for women’s apparel, a 2.0% increase in the price index for girl’s apparel, and a 0.5% increase in the price index for footwear…. meanwhile, the price index for transportation commodities other than fuel was 0.2% higher even as prices for new cars and trucks fell 0.1% because prices for used cars and trucks rose 0.6% and the price index for vehicle parts and equipment other than tires rose 0.5%… at the same time, prices for medical care commodities averaged 0.1% higher as non-prescription drugs prices rose 0.2% and the index for medical equipment and supplies rose 1.0%….in addition, the recreational commodities index was also 0.1% higher despite a 2.4% decrease in TV prices because the price index for sporting goods rose 0.9% and the price index for newspapers and magazines rose 0.7%….however, the education and communication commodities index was 0.1% lower even though college textbook prices rose 0.5% due to on a 2.8% decrease in the price index for computers, peripherals, and smart home assistant devices and a 0.8% decrease in the price index for telephone hardware, calculators, and other consumer information items…lastly, a separate price index for alcoholic beverages was 0.3% lower, while the price index for ‘other goods’ was 0.3% higher on an 0.4% increase in the index for hair, dental, shaving, and miscellaneous personal care products and a 1.0% increase in the price of cigarettes…

Within core services, the price index for shelter rose 0.3% as rents rose 0.3%, homeowner’s equivalent rent rose 0.2%, and prices for lodging away from home at hotels and motels rose 1.2%, while the shelter sub-index for water, sewers and trash collection rose 0.2%, and household operation costs were on average 0.2% higher….at the same time, the price index for medical care services was 0.4% higher, as the index for inpatient hospital services rose 0.4% and health insurance rose 1.5%….meanwhile, the transportation services price index was was unchanged as the price index for car and truck rental rose 5.2% while vehicle repairs fell 0.2% and airline fares fell 0.9% and intercity bus fares fell 2.6%….on the other hand, the recreation services price index rose 0.6% as veterinarian services rose 0.5% and the index for admission to sporting events rose 3.7%…in addition, the index for education and communication services was 0.4% higher as the index for child care and nursery school rose 0.3% and land-line telephone services rose 1.3%….lastly, the index for other personal services was up 0.1% as the price index for haircuts and other personal care services was 0.5% higher…

Among core line items, prices for televisions, which now average 20.3% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 13.8% since last November, and the price index for computer software and accessories, which is down 13.0% year over year, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is now up by 20.2% over the past year, the price index for infants’ furniture, which has increased 21.2% year over year, and intercity bus-fare, which has increased by 28.0% since last November, are the only line items to have increased by a double digit magnitude over that span….

Retail Sales Up 0.2% in November after October Sales are Revised Higher

Seasonally adjusted retail sales increased 0.2% in November after retail sales for October sales were revised 0.1% higher…the Advance Retail Sales Report for November (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $528.0 billion during the month, which was 0.2 percent (±0.4%) higher than October’s revised sales of $527.0 billion and 3.3 percent (±0.7 percent) above the adjusted sales in November of last year.…October’s seasonally adjusted sales were revised up from $526.5 billion to $527.0 billion, while September’s sales were revised lower, from $525.2 billion to $524.65 billion; as a result, the September to October change was revised from up 0.3 percent (±0.4%) to up 0.4 percent (±0.2%), while the change in September’s sales was revised from a decrease of 0.1% to a decrease of 0.3%…assuming a similar inflation adjustment, the $0.55 billion downward revision to September sales should reduce previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by 0.04 or 0.05 percentage points…..unadjusted sales, extrapolated from surveys of a small sampling of retailers, were estimated to have risen 2.3%, from $525,865 million in October to $538,185 million in November, while they were up 2.9% from the $522,804 million of sales in November a year ago…

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the November Census Marts pdf….the first pair of columns below gives us the seasonally adjusted percentage change in sales for each kind of business from the October revised figure to this month’s November “advance” report in the first sub-column, and then the year over year percentage sales change since last November in the 2nd column…the second double column pair below gives us the revision of the October advance estimates (now called “preliminary”) as of this report, with the new September to October percentage change under “Sep 2019 r” (revised) and the revised October 2018 to October 2019 percentage change in the last column shown…for your reference, the table of last month’s advance estimate of October sales, before this month’s revisions, is here.…

November 2019 retail sales table

To compute November’s real personal consumption of goods data for national accounts from this November retail sales report, the BEA will use the corresponding price changes from the November consumer price index, which we reviewed above…to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals…from the third line on this table, we can see that November retail sales excluding the 0.7% price-related increase in sales at gas station were up by 0.1%….then, subtracting the figures representing the 0.3% increase in grocery & beverage sales and the 0.3% decrease in food services sales from that total, we find that core retail sales were up by almost 0.2% for the month…since the CPI report showed that the composite price index for all goods less food and energy goods was unchanged in November, we can thus approximate that real retail sales excluding food and energy will on average be close to our nominal core retail sales, or show an increase of roughly 0.2%…however, the actual adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while sales at furniture stores were up 0.1%, the price index for household furnishings and supplies decreased by 0.1%, which would suggest that real sales at furniture stores rose 0.2%…on the other hand, while nominal sales at clothing stores were 0.6% lower in November, the apparel price index was 0.1% higher, which would mean that real sales of clothing fell around 0.7%.…similarly, while nominal sales at sporting goods, hobby, music and book stores fell 0.5%, the price index for recreational commodities rose 0.1%, so we can figure real sales of recreational goods were down roughly 0.6%…

In addition to figuring those core retail sales, to make a complete estimate of real November PCE, we’ll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do.…the CPI report showed that the food price index was 0.1% higher in November, with the index for food purchased for use at home 0.1% higher, while prices for food bought to eat away from home were 0.2% higher… hence, with nominal sales at food and beverage stores 0.3% higher, real sales of food and beverages would only be roughly 0.2% higher in light of the 0.1% higher prices…likewise, the 0.3% decrease in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants fell about 0.5%…meanwhile, while sales at gas stations were up 0.7%, there was a 1.1% increase in the retail price of gasoline, which would suggest real sales of gasoline were down on the order of 0.4%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales…..by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we can estimate that the income and outlays report for November will show that real personal consumption of goods rose by nearly 0.2% for the month, after falling by a revised 0.1% in October and rising by a revised 0.3% in September…at the same time, the 0.5% drop in real sales at bars and restaurants would reduce November’s real personal consumption of services by half of 0.1%…

Producer Price Index Unchanged in November As Higher Food & Energy Prices are Offset by Lower Margins for Trade Services

The seasonally adjusted Producer Price Index (PPI) for final demand was unchanged in November, as prices for finished wholesale goods rose 0.3% while margins of final services providers fell 0.3%…that followed an October report that had the PPI 0.4% higher, with prices for finished wholesale goods 0.7% higher and margins of final services providers up by 0.3%, a September report that showed producer prices fell 0.3%, with prices for finished wholesale goods 0.4% lower while margins of final services providers decreased by 0.2%, a revised August report that showed the PPI rose 0.2%, even prices for finished wholesale goods fell by 0.3%, because the more heavily weighted margins of final services providers increased by 0.3%, and a revised July report that indicated the PPI rose 0.2%, as prices for finished wholesale goods increased 0.3%, while margins of final services providers increased by 0.2%….on an unadjusted basis, producer prices are still 1.1% higher than a year ago, same as the year over year change indicated by last month’s report, which had been the lowest annual price increase since the year ended October 2016…meanwhile, the core producer price index, which excludes food, energy and trade services, was also unchanged for the month, and is now 1.3% higher than in November a year ago, down from the 1.5% YoY increase shown in October…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 0.3% higher in November, after being 0.7% higher in October, 0.4% lower in September, 0.5% lower in August, 0.4% higher in July, 0.5% lower in June, 0.2% lower in May, 0.4% higher in April, 1.0% higher in March, 0.3% higher in February, 0.6% lower in January, 0.6% lower in December, and 0.5% lower in November of 2018….the finished goods index rose 0.3% in November because the wholesale price index for energy was 0.6% higher, after rising by 2.8% in October, after falling by 2.5% in September and by a revised 1.7% in August, and after rising by a revised 1.0% in July, and because the price index for wholesale foods rose 1.1% in November after rising 1.3% in October and 0.3% in September, while the index for final demand for core wholesale goods (excluding food and energy) was 0.2% higher after being unchanged in October….wholesale energy prices were higher due to a 2.3% increase in wholesale prices for gasoline and 8.0% higher wholesale prices for LP gas, while the wholesale food price index rose on a 6.3% increase in the wholesale price index for fresh and dry vegetables, 5.4% increases in the wholesale prices of both beef and pork, and a 76.6% increase in the wholesale price of eggs for fresh use….among wholesale core goods, wholesale prices for cigarettes rose 2.1% and wholesale prices for iron and steel scrap rose 8.2%..

At the same time, the index for final demand for services fell 0.3% in November, after rising by 0.3% in October, falling by 0.2% in September, rising 0.3% in August and a revised 0.2% in July, as the index for final demand for trade services fell 0.6%, the index for final demand for transportation and warehousing services fell 0.3%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.1% lower….among trade services, seasonally adjusted margins for TV, video, and photographic equipment and supplies retailers fell 8.2%, margins for food and alcohol retailers fell 4.0% 2.6%, and margins for food wholesalers fell 5.0%, while margins for automobile retailers rose 3.0%… among transportation and warehousing services, margins for airline passenger services fell 2.3%…among the components of the core final demand for services index, margins for arrangement of vehicle rentals and lodging fell 5.9%, margins for securities brokerage, dealing, investment advice, and related services fell 3.7%, and margins for hospital outpatient care fell 1.1%, while margins for traveler accommodation services rose 2.6%…

This report also showed the price index for intermediate processed goods rose 0.2% in November, after rising 0.4% in October. falling by 0.4% in September,  falling by a revised 0.3% in August, and rising by a revised 0.1% in July….the price index for intermediate energy goods rose 1.3%, as refinery prices for gasoline rose 2.3%, refinery prices for No. 2 diesel fuel rose 4.3%, and prices for natural gas sold to electric utilities rose 4.9%…at the same time, prices for intermediate processed foods and feeds rose 1.4%, as the producer price index for meats rose 3.9% and producer prices for dairy products rose 1.6%… meanwhile, the core price index for intermediate processed goods less food and energy fell 0.3% as the producer price index for industrial chemicals fell 1.4% and producer prices for steel mill products decreased 1.9%… prices for intermediate processed goods are still 2.9% lower than in November a year ago, the seventh consecutive year over year decrease, following 29 months of year over year increases, which had been preceded by 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 3.9% in November, after rising 1.0% in October, falling 1.4% in September, falling by a revised 1.8% in August, and rising by a revised 1.2% in July….that was as the November price index for crude energy goods rose 10.8% as crude oil prices rose 10.2% and unprocessed natural gas prices rose 19.5%, while the price index for unprocessed foodstuffs and feedstuffs fell 0.2% as a 3.9% derease in producer prices for corn, and a 3.9% decrease in producer prices for slaughter chickens were mostly offset by 1.7% increases in producer prices for hogs and for slaughter steers and heifers, and a 4.6% increase in producer prices for wheat….at the same time, the index for core raw materials other than food and energy materials rose 0.3%, as prices for aluminum base scrap fell 4.6% while prices for unprocessed iron and steel scrap rose 8.2%…this raw materials index is still 5.5% lower than a year ago, as the year over year change on this index has been negative all year…

Lastly, the price index for services for intermediate demand fell 0.1 percent in November after falling 0.2 percent in October, rising 0.1 percent in September, rising a revised 0.2% in August, and rising a revised 0.1% in July…the price index for intermediate trade services was 0.2% lower, as margins for metals, minerals, and ores wholesaling fell 2.7%, margins for intermediate food wholesalers fell 5.0%, and margins for intermediate paper and plastic product wholesalers fell 1.6%…on the other hand, the index for transportation and warehousing services for intermediate demand was 0.1% higher, as the price index for intermediate air mail and package delivery services rose 0.6% and the price index for water transportation of freight rose 2.9%…at the same time, the core price index for intermediate services less trade, transportation, and warehousing was unchanged, as the intermediate price index for securities brokerage, dealing, investment advice, and related services fell 3.7% and the price index for Internet advertising space sales fell 6.4%, while the index for intermediate accounting services rose 2.3% and margins for intermediate traveler accommodation services rose 2.6%…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 still 1.4% higher than it was a year ago, down from 1.6% in October and from 2.4% two months ago…

October Business Sales Down 0.1% Business Inventories Up 0.2%

After the release of the November retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for October (pdf), which incorporates the revised October retail data from that November report and the earlier published October wholesale and factory data to give us a complete picture of the business contribution to the economy for the month….according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,456.0 billion in October, down 0.1 percent (±0.2%)* from September’s revised sales, and down 0.1 percent (±0.3 percent)* from October sales of a year earlier…note that total September sales were concurrently revised down from the originally reported $1,459.4 billion to $1,457.14 billion….manufacturer’s sales were statistically unchanged from September at $500,158 million in October; retail trade sales, which exclude restaurant & bar sales from the revised October retail sales reported earlier, rose 0.5% to $461,565 million, while wholesale sales fell 0.7% to $494,271 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,042.8 billion at the end of October, up 0.2 percent (±0.1%) from September, and 3.1 percent (±0.4 percent) higher than in October a year earlier…at the same time, the value of end of September inventories was revised from the $2,041.5 billion reported last month to $2,039.07 billion, now down 0.1% from August…that $2.4 billion downward revision to September inventories should reduce the previous estimate of the inventory component to 3rd quarter GDP by more than $9.6 billion annually, which would subtract around 0.15 percentage points from 3rd quarter GDP…seasonally adjusted inventories of manufacturers were estimated to be valued at $698,785 million at the end of October, an increase of 0.1% from September, and inventories of retailers were valued at $668,484 million, 0.3% greater than September, and inventories of wholesalers were estimated to be valued at $675,573 million at the end of October, 0.1% greater than in September…

For GDP purposes, all inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for October, which was up 0.7% for finished goods…last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those inventories would have a large negative impact on 4th quarter GDP…also last week, we found that real wholesale inventories were also substantially negative and hence would also subtract from 4th quarter GDP growth….since the nominal value of retail inventories for October has now been shown to be just 0.1% higher, real retail inventories for the month, after the 0.7% finished goods price adjustment, thus would have thus decreased by 0.6% from September, after a third quarter that saw total inventories increase at an inflation adjusted $80 billion annual rate, before the pending revision we noted above…therefore, any inventory decrease over the 4th quarter would necessarily subtract that amount, plus the amount of the decrease, 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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