Q3 GDP revision, November’s income & outlays, industrial production, new home construction, & existing home sales; October’s JOLTS

In advance of the holidays, some of the reports that are normally released during the last week of the month were accelerated into this week…that meant that we have the 3rd estimate of 3rd quarter GDP and the November report on Personal Income and Spending, both from the Bureau of Economic Analysis, in addition to the November report on Industrial Production and Capacity Utilization from the Fed, the Job Openings and Labor Turnover Survey (JOLTS) for October and the Regional and State Employment and Unemployment Summary for November, both from the Bureau of Labor Statistics, the November report on New Residential Construction from the Census bureau, and the Existing Home Sales Report for November from the National Association of Realtors (NAR)….

The week also saw the release of three regional Fed manufacturing surveys for December: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, an adjacent county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from +2.9 in November to +3.5 in December, still suggesting fairly sluggish growth of First District manufacturing; the Philadelphia Fed Manufacturing Survey for December, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions decreased from a reading of +10.4 in November to +0.3 in December, indicating virtual stagnation of that region’s manufacturing; and the Kansas City Fed manufacturing survey for December, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index fell to -8 in December, down from readings of -3 in both November and October, suggesting a greater contraction of that region’s manufacturing than was seen in previous months…  

3rd Quarter GDP Growth Rate Remains at 2.1% in 3rd Estimate

The Third Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services increased at a 2.1% annual rate in the quarter, revised but unchanged from the 2.1% growth rate reported in the second estimate last month, as an upward revision to growth in personal consumption of services was offset by downward revisions to growth of personal consumption of goods and of inventories, and by an upward revision to imports, which subtract from GDP…in current dollars, our third quarter GDP grew at a 3.84% annual rate, increasing from what would work out to be a $21,340.3 billion a year output rate in the 2nd quarter to a $21,542.5 billion annual rate in the 3rd quarter, with the headline 2.1% annualized rate of increase in real output arrived at after annualized inflation adjustments averaging 1.8%, aka the GDP deflator, was computed and applied to the current dollar change of each of the GDP components…..

Recall that the GDP release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as representing quantity indexes than any reality based dollar amounts….for our purposes, all the data that we’ll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 3rd quarter GDP, which is linked to on the BEA GDP landing page…specifically, we reference table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2015; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the components…the pdf for the 2nd quarter second estimate, which this estimate revises, is here

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 2.9% growth rate reported last month to a 3.2% rate in this 3rd estimate…that growth rate figure was arrived at by deflating the 4.68% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation increased at a 1.5% annual rate in the 3rd quarter, which was unrevised from the PCE inflation rate reported a month ago……real personal consumption of durable goods grew at a 8.1% annual rate, revised from the 8.3% growth rate shown in the 2nd estimate, and added 0.56 percentage points to GDP, as an increase in real consumption of recreational goods and vehicles at a 17.0% rate accounted for almost two-thirds of the durables goods increase…real consumption of nondurable goods by individuals grew at a 3.9% annual rate, revised from the 4.3% rate reported in the 2nd estimate, and added 0.53  percentage points to the 3rd quarter economic growth rate, as a 5.5% growth rate in real consumption of food and beverages accounted for more than 45% of the growth in non-durables….at the same time, consumption of services rose at a 2.2% annual rate, revised from the 1.7% growth rate reported last month, and added 1.02 percentage points to the final GDP tally, as real growth of most services, other than of health care and recreation which were near stagnant, all contributed to the quarter’s growth in services…

Meanwhile, seasonally adjusted real gross private domestic investment shrunk at a 1.0% annual rate in the 3rd quarter, revised from the 0.1% contraction rate reported last month, as real private fixed investment contracted at a 0.8% rate, revised from the 1.0% contraction rate shown in the second estimate, while inventories grew less than was previously estimated….investment in non-residential structures was revised to show contraction at a 9.9% rate, down from the 12.0% contraction rate previously reported, and real investment in equipment contracted at a 3.8% rate, same as was indicated by the 2nd estimate…at the same time, the quarter’s investment in intellectual property products was revised from growth at a 5.1% rate to growth at a 4.7% rate, while real residential investment was shown to be growing at a 4.6% annual rate, rather than the 5.1% contraction rate previously reported…after those revisions, the decrease in investment in non-residential structures subtracted 0.30 percentage points from the 3rd quarter’s growth rate and the decrease in investment in equipment subtracted 0.22 percentage points from the quarter’s growth rate, while growth in investment in intellectual property added 0.22 percentage points to the growth of GDP and the growth of residential investment added 0.17 percentage points to the growth rate of 3rd quarter GDP…

In addition, investment in real private inventories grew by an inflation adjusted $69.4 billion in the 3rd quarter, revised from the previously reported $79.8 billion of real inventory growth, and subtracted 0.03 percentage pointed from GDP, after the previous report showed a $10.4 billion increase in real inventory growth from the 2nd quarter had added 0.17 percentage points to the quarter’s growth rate….as growth in inventories indicates that more of the goods produced during the quarter were left in warehouses or “sitting on the shelf”, that their growth was little changed in the quarter means that growth of real final sales of GDP in the 3rd quarter was the same as growth in GDP at 2.1%, down from the real final sales growth rate of 3.0% in the 2nd quarter, when a decrease in inventory growth meant that growth in real final sales of domestic product was greater than the real growth in GDP…

The previously reported increase in real exports was revised a bit higher with this estimate, but the previously reported increase in real imports was revised upwards by more, and as a result the change in our net trade was a greater subtraction from GDP than was previously reported…our real exports grew at a 1.0% rate rather than the 0.9% rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, that growth added 0.11 percentage points to the 3rd quarter’s growth rate, statistically unrevised from the addition shown in the previous report….meanwhile, the previously reported 1.5% increase in our real imports was revised to indicate a 1.8% increase, and since imports are subtracted from GDP because they represent either consumption or investment that was added to an other GDP component that was not produced domestically, their increase subtracted 0.26 percentage points from 3rd quarter GDP, rather than the 0.22 percentage point subtraction shown last month….thus, our deteriorating trade balance subtracted a rounded total of 0.14 percentage points from 3rd quarter GDP, rather than the 0.11 percentage point subtraction that had been indicated by the second estimate…

Finally, the entire government sector grew at a 1.7% rate, revised from the 1.6% growth rate previously reported, as federal government consumption and investment grew a bit less than was indicated by the second estimate, while growth of real state & local government consumption and investment was greater than previously reported…real federal government consumption and investment was seen to have grown at a 3.3% rate from the 2nd quarter in this estimate, revised from the 3.4% growth rate shown in the second estimate, as real federal outlays for defense grew at a 2.2% rate and added 0.09 percentage points to 3rd quarter GDP, unchanged from the contribution shown previously, while all other federal consumption and investment grew at a downwardly revised 5.0% rate but still added 0.13 percentage points to 3rd quarter GDP, same as was shown last month…. meanwhile, real state and local consumption and investment grew at a 0.7% rate in the quarter, which was revised from the 0.5% growth rate reported in the 2nd estimate, and added 0.08  more percentage points to 3rd quarter GDP….note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services…

November Personal Income Up 0.5%; Personal Spending up 0.4%; PCE Price Index Up < 0.2%

The November report on Personal Income and Outlays from the Bureau of Economic Analysis gives us nearly half the data that will go into 4th quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, and the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated….this report also provides us with the nation’s November personal income data, disposable personal income, which is income after taxes, and our monthly savings rate…however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics are not the current monthly change; rather, they’re seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase in a year if November’s adjusted income and spending were extrapolated over an entire year…however, the percentage changes are computed monthly, from one month’s annualized figure to the next, and in this case of this month’s report they give us the percentage change in each annualized metric from October to November….

Hence, when the opening line of the press release for this report tell us “Personal income increased $101.7 billion (0.5 percent) in November“, they mean that the annualized figure for seasonally adjusted personal income in November, $18,911.2 billion, was $101.7 billion higher, or more than 0.5% greater than the annualized personal income figure of $18,809.5 billion extrapolated for October; the actual, unadjusted change in national personal income from October to November is not given…at the same time, annualized disposable personal income, which is income after taxes, also rose by more than 0.5%, from an annual rate of $16,615.0 billion in October to an annual rate of $16,702.7 billion in November…those increases were arrived at after personal income for October was revised up from $18,794.4 billion annually and October’s disposable personal income was revised up from $16,592.1 billion annually….the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized…in November, the largest contributors to the $101.7 billion annual rate of increase in personal income were a $37.3 billion annual rate of increase in wages and salaries, a $31.5 billion annual rate of increase in proprietors’ income, and a $23.1 billion annual rate of increase in interest & dividend income…

For the personal consumption expenditures (PCE) that we’re interested in, BEA reports that they increased at a $64.9 billion rate, or at more than a 0.4% rate, as the annual rate of PCE rose from $14,759.2 billion in October to $14,824.1 billion in November….at the same time, October PCE was revised more than 0.1% higher, from $14,742.1 billion annually to $14,759.2 billion….total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $68.6 billion to $15,388.0 billion annually in November, which thus left total personal savings, which is disposable personal income less total outlays, at a $1,314.7 billion annual rate in November, up from the revised $1,295.6 billion in annualized personal savings in October… as a result, the national personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 7.9% in November, from the October savings rate of 7.8%…

As you know, before personal consumption expenditures are used in the computation of GDP, they are first adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption….the BEA does that by computing, mostly from CPI source data, a price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, and which is included in Table 9 in the pdf for this report…that index rose from 110.200 in October to 110.373 in November, a month over month inflation rate that’s statistically 0.15699%, which BEA reports as a 0.2% increase, following the rounded 0.2% PCE price index increase they reported for October…applying the actual November inflation adjustment to the nominal change in spending left real PCE up by a rounded 0.3% in November, after October’s rounded real PCE growth of 0.1%…notice that when those price indexes are applied to a given month’s annualized PCE in current dollars, it yields that month’s annualized real PCE in chained 2012 dollars, which are the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….that result is shown in table 7 of the PDF, where we see that November’s chained dollar consumption total works out to 13,431.4 billion annually in 2012 dollars, 0.2815% more than October’s 13,393.7 billion, a growth rate that the BEA rounds up and reports as +0.3%…

However, to estimate the impact of the change in PCE on the change in GDP, month over month changes expressed like that don’t help us much, since GDP is reported quarterly…thus we have to compare October’s and November’s real PCE to the the real PCE of the 3 months of the third quarter….while this report shows PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 3rd quarter was represented by 13,353.1 billion in chained 2012  dollars…(note that’s the same as what’s shown in table 3 of the pdf for the revised 3rd quarter GDP report)….then, by averaging the annualized chained 2012 dollar figures for October and November, 13,393.7 billion and 13,431.4 billion respectively, we get an equivalent annualized PCE for the two months of the 4th quarter data that we have so far….when we compare that average of 13,412.55 to the 3rd quarter real PCE of 13,353.1, we find that 4th quarter real PCE has grown at a 1.79% annual rate for the two months of the 4th quarter that are included in this report…(notice the math we used to get that annual growth rate: [ (((13,431.4 + 13,393.7) / 2) / 13,353.1) ^ 4 = 1.017928 ] …that’s a growth rate that would add 1.25 percentage points to the GDP growth rate of the 4th quarter, even if there is no improvement in December PCE from that average… 

Industrial Production Up 1.1% in November After October Production Revised Lower

The Fed’s G17 release on Industrial production and Capacity Utilization reported that industrial production rose 1.1% in November after falling by a revised 0.9% in October, as the manufacturing index reflected the reversal the impact of the GM strike….the total industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 109.7 in November from 108.5 in October, which was revised from the 108.7 index reported last month…at the same time, the September index was revised down from 109.6 to 109.5, while the August index was revised but remained at 109.9….year over year, industrial production is still down 0.8%, but improved from last month’s 1.1% year over year decrease….

The manufacturing index, which accounts for more than 77% of the total IP index, rose from 103.8 in October to 104.8 in November, partly on a 12.4% increase in the output of motor vehicles and parts, which had decreased a revised 5.8% in October due to the strike…at the same time, the manufacturing index for October was revised from 104.0 to 103.8, the manufacturing index for September was revised from 104.7 to 104.5, and the manufacturing index for August was revised from 105.2 to 105.3… meanwhile, the mining index, which includes oil and gas well drilling, slipped from 132.5 in October to 132.3 in November, after the October index was revised up from 132.1, which left the mining index 2.0% higher than it was a year earlier…finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 2.9% in November, from a downwardly revised 103.6 in October to 106.6 in November, but is still 4.1% lower than it was a year earlier..

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total US industry rose to 77.3% in November from 76.6% in October, which was revised from the 76.7% reported last month …capacity utilization of NAICS durable goods production facilities rose from 74.1% in October to 75.6% in November as capacity utilization for motor vehicles and parts rebounded from 69.5% to 80.1%, while capacity utilization for non-durables producers fell from 75.9% to 75.8%…at the same time, capacity utilization for the mining sector fell to 88.6% in November from 89.1% in October, which was originally reported at 88.8%, while utilities were operating at 77.3% of capacity during November, up from their 75.2% of capacity during October, which was revised down from the previously reported 75.4%…for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories….  

Job Openings and Job Quitting Increase in October, Hiring and Firing Decreases

The Job Openings and Labor Turnover Survey (JOLTS) report for October from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 235,000, from 7,032,000 openings in September to 7,267,000 in October, after September job openings were revised 8,000 higher, from 7,024,000 to 7,032,000…however, October’s jobs openings were still 4.9% lower than the 7,593,000 job openings reported in October a year ago, as the job opening ratio expressed as a percentage of the employed rose to 4.6% in October from 4.4% September, while it was down from 4.8% in October a year ago…among the largest gains, job openings in retail increased from 741,000 to 866,000, and job openings in durable goods manufacturing increased from 292,000 to 342,000, while job openings in the information sector fell from 162,000 to 129,000 (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 tables for the data cited, which are linked to 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 October, seasonally adjusted new hires totaled 5,764,000, down by 187,000 from the revised 5,951,000 who were hired or rehired in September, as the hiring rate as a percentage of all employed fell to 3.8% from 3.9% in September, and was also down from from 3.9% in October a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations fell by 162,000, from 5,798,000 in September to 5,636,000 in October, while the separations rate as a percentage of the employed fell to 3.7%, down from 3.8% in September and down from 3.8% in October a year ago (see table 3)…subtracting the 5,636,000 total separations from the total hires of 5,764,000 would imply an increase of 128,000 jobs in October, a bit less than the revised payroll job increase of 156,000 for October reported in the November establishment survey of two weeks ago, but still well within the expected +/-115,000 margin of error for these reports

Breaking down the seasonally adjusted job separations, the BLS finds that 3,512,000 of us voluntarily quit our jobs in October, up by 41,000 from the 3,471,000 who quit their jobs in September, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.3% of total employment, the same quits rate as a year earlier (see details in table 4)….in addition to those who quit, another 1,769,000 were either laid off, fired or otherwise discharged in October, down by 202,000 from the revised 1,971,000 who were discharged in September, as the discharges rate fell from 1.3% to 1.2% of all those who were employed during the month, same as the discharges rate of 1.2% a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 355,000 in October, down from 356,000 in September, for an ‘other separations rate’ of 0.2%, which was unchanged from September and from October 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 by using the links to tables at the bottom of the press release

Housing Starts Reported Higher in November; S/A Building Permits at a 12 Year High

The November report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,365,000 units during the month, which was 3.2 percent (±10.0 percent)* above the revised October estimated annual rate of 1,323,000 housing unit starts, and was 13.6 percent (±12.8 percent) above last November’s rate of 1,202,000 housing starts a year…the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, with the figure in parenthesis the most likely range of the change indicated; in other words, November housing starts could have been down by 6.8% or up by as much as 13.2% from those of October, with even larger revisions possible…in this report, the annual rate for October housing starts was revised from the 1,314,000 units reported last month to 1,323,000, while September starts, which were first reported at a 1,256,000 annual rate, were revised but unchanged from last month’s initial revised figure of 1,266,000 with this report….

Those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 103,500 housing units were started in November, down from the 113,700 units that were started in October…of those housing units started in November, an estimated 68,300 were single family homes and 33,200 were units in structures with more than 5 units, down from last month’s revised 73,300 single family starts, and down from the 35,200 units started in structures with more than 5 units in October…

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in November, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,482,000 housing units annually, the highest rate since May 2007, which was also 1.4 percent (±1.4 percent)* above the revised October annual rate of 1,461,000 permits, and was 11.1 percent (±1.8 percent) above the rate of building permit issuance in November a year earlier…the annual rate for housing permits issued in October was revised but remained at 1,461,000, as it was originally reported….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for 108,100 housing units were issued in November, down from the revised estimate of 131,700 new permits issued in October…the November permits included 65,300 permits for single family homes, down from 79,800 single family permits issued in October, and 41,700 permits for housing units in apartment buildings with 5 or more units, down from 47,700 such multifamily permits a month earlier… for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.365 Million Annual Rate in November and Comments on November Housing Starts

November Existing Home Sales Down 1.7% in November, Still Up 2.7% from a Year Ago

The National Association of Realtors (NAR) reported that their seasonally a djusted count of existing home sales fell by 1.7% from October to November, projecting that 5.35 million existing homes would sell over an entire year if the November home sales pace were extrapolated over that year, a pace that was still 2.7% above the annual sales rate they projected for November of a year ago…October home sales were at a 5.44 million annual rate, revised from the 5.46 million annual rate indicated in last month’s report…the NAR also reported that the median sales price for all existing-home types was $271,300 in November, up 5.4% from from the $257,400 median sales price reported for November of last year, which they report “marks 93 straight months of year-over-year gains“…..the NAR press release, which is titled “Existing-Home Sales Descend 1.7% in November“, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find that all info in that press release…as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation of the actual number of homes that sold each month…this unadjusted data indicates that roughly 404,000 homes sold in November, down by 12.6% from the 464,000 homes that sold in October, and down by 0.5% from the 406,000 homes that sold in November of last year, so we can see how the seasonal adjustment reduced the magnitude of the month over month decrease as indicated by the annualized published figures….that same pdf indicates that the median home selling price for all housing types rose by just 0.1%, from a revised $271,000 in October to $271,300 in November, while the average home sales price was $308,000, up 0.3% from the $307,200 average sales price in October, and up 4.0% from the $296,100 average home sales price of November a year ago…for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Decreased to 5.35 million in November and Comments on November Existing Home Sales


(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…)      

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s