January’s producer prices, new home construction, and existing home sales

Major reports that were released this past week included the January Producer Price Index from the Bureau of Labor Statistics, the January report on New Residential Construction from the Census Bureau, and the Existing Home Sales Report for January from the National Association of Realtors (NAR)…The week also saw the release of the first two regional Fed manufacturing surveys for February: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from +3.5 in December and from +4.8 in January to +12.9 in February, suggesting a pickup in the pace of First District manufacturing growth.. meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from +2.4 in December and +17.0 in January to +36.7 in February, its highest reading since February 2017, indicating widespread growth among that region’s manufacturing firms this month…

Producer Prices Up 0.5% in January on Higher Margins for Apparel, Sporting Goods, and Fuel Retailers

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.5% in January, as prices for finished wholesale goods were on average 0.1% higher, while margins of final services providers increased by 0.7%…that followed a revised December report that now shows the PPI was up 0.2%, with prices for finished wholesale goods up 0.3% while margins of final services providers were unchanged, a revised November report that shows the PPI was 0.1% lower, with prices for finished wholesale goods rising 0.3% while margins of final services providers decreased 0.3%, a revised October report that indicates the PPI was 0.3% higher, with prices for finished wholesale goods rising 0.5% and margins of final services providers rising 0.3%, and a revised September report that indicates the PPI was 0.3% lower, with prices for finished wholesale goods 0.2% lower and margins of final services providers 0.1% lower….revisions to prior reports reflect the routine annual recalculation of seasonal adjustment factors and affect previously published seasonally adjusted indexes and percent changes for January 2015 through December 2019….on an unadjusted basis, producer prices are now 2.1% higher than a year ago, up from the 1.3% year over year increase indicated by last month’s report, while, the core producer price index, which excludes food, energy and trade services, rose by 0.4% for the month, and is now 1.5% higher than in January a year ago, the same year over year increase as was shown in December…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 0.1% higher in January, after being 0.3% higher in December, 0.3% higher in November, 0.5% higher in October, 0.2% lower in September, 0.3% lower in August, 0.3% higher in July, 0.5% lower in June, 0.2% lower in May, 0.3% higher in April, 0.9% higher in March, 0.3% higher in February, and 0.6% lower in January of last year….the finished goods index rose 0.1% in January because the index for final demand for core wholesale goods (excluding food and energy) was 0.3% higher after rising 0.2% in December, and because the price index for wholesale foods rose 0.2% in January after falling 0.3% in December but after rising 1.2% in November and 1.4% in October, while the wholesale price index for energy goods was 0.7% lower, after rising by 1.5% in December. 0.3% in November and 2.0% in October…wholesale energy prices were lower due to a 1.5% decrease in wholesale prices for gasoline, a 8.1% decrease in wholesale prices for liquefied petroleum gas, and a 5.5% decrease in wholesale prices for diesel fuel, while the wholesale food price index rose on a 22.4% increase in the wholesale price index for fresh and dry vegetables, and a 6.1% increase in the wholesale price index for oilseeds, which were partially offset by a 35.2% decrease in the wholesale price of eggs for fresh use….among wholesale core goods, wholesale prices for iron and steel scrap rose 13.9%, wholesale prices for textile home-furnishings rose 1.8%, and the wholesale price index for industrial chemicals rose 1.7%..

At the same time, the index for final demand for services rose 0.7% in January, after being unchanged in December, falling by 0.3% in November, rising by 0.3% in October, and falling by a 0.3% in September, as the index for final demand for trade services rose 1.2%, the index for final demand for transportation and warehousing services fell 1.6%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.6% higher….among trade services, seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers rose 10.3%, margins for sporting goods and boat retailers rose 4.4%, and margins for fuel & lubricants retailers also rose 4.4%, while margins for professional and commercial equipment wholesalers fell 3.8% … among transportation and warehousing services, margins for airline passenger services fell 5.8%…among the components of the core final demand for services index, margins for portfolio management rose 2.3%, margins for bundled wired telecommunications access services rose 3.5%, and margins for passenger car rental rose 5.7%, while margins for arrangement of vehicle rentals and lodging fell 9.7%…

This report also showed the price index for intermediate processed goods fell 0.3% in January, after rising 0.1% in December, 0.1% in November, and 0.4% in October, but after falling by a revised 0.1% in September and by 0.5% in August….the price index for intermediate energy goods fell 2.1%, as refinery prices for gasoline fell 1.5% and refinery prices for No. 2 diesel fuel fell 5.5%, while prices of natural gas sold to utilities fell 3.5%…at the same time, prices for intermediate processed foods and feeds fell 0.1%, as the producer price index for meats fell 1.4% and the index for processed poultry fell 0.6%… meanwhile, the core price index for intermediate processed goods less food and energy rose 0.3% as the producer price index for iron and steel rose 2.8% and producer prices for secondary nonferrous metals increased 3.1%… prices for intermediate processed goods are still 1.0% lower than in January a year ago, the ninth 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 fell 0.6% in January, after rising a revised 1.6% in December and 4.0% in November, but after falling by a revised 0.8% in October and being unchanged in September….that was as the January price index for crude energy goods fell 5.7% as crude oil prices fell 2.0% and as unprocessed natural gas prices fell 14.3%, while the price index for unprocessed foodstuffs and feedstuffs rose 0.9% on a 10.2% increase in producer prices for slaughter turkeys and a 10.5% increase in producer prices for wheat…at the same time, the index for core raw materials other than food and energy materials rose 5.6%, as prices for unprocessed iron and steel scrap rose 13.9%, prices for wastepaper rose 7.1%, and prices for nonferrous metal ores rose 5.5%…this raw materials index is still 3.2% lower than a year ago, as the year over year change on this index remained negative all last year…

Lastly, the price index for services for intermediate demand was unchanged in January after rising 0.4 percent in December, falling 0.1 percent in November, falling a revised 0.4 percent in October, and rising a revised 0.2 percent in September…the price index for intermediate trade services was 0.3% higher, as margins for intermediate building materials, paint, and hardware wholesalers rose 2.5%, margins for metals, minerals, and ores wholesalers rose 1.6%, and margins for intermediate hardware, building material, and supplies retailers rose 2.9%, while margins for machinery and equipment parts and supplies wholesalers fell 2.5%…on the other hand, the index for transportation and warehousing services for intermediate demand was 0.9% lower, as the price index for intermediate transportation of passengers (partial) fell 5.7% and the index for arrangement of freight and cargo fell 7.9%…at the same time, the core price index for intermediate services less trade, transportation, and warehousing rose 0.1%, as the intermediate price index for bundled wired telecommunication access services rose 3.5%, the price index for radio advertising time sales rose 5.1%, and the price index for television advertising time sales rose 5.1%, while the price index for business loans (partial) fell 6.7% and the index for “internet advertising space sales, excluding Internet ads sold by print publishers” fell 3.7%…over the 12 months ended in January, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 1.7% higher than it was a year ago, down from 1.8% in December but up from 14% in November…

January Housing Starts Reported Lower after Prior Months Revised Higher; Permits at 13 Year High

The January report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in January was at a seasonally adjusted annual rate of 1,567,000, which was 3.6 percent (±13.3 percent)* below the revised December estimated annual rate of 1,626,000, but was 21.4 percent (±12.2 percent) above last January’s rate of 1,291,000 housing starts annually….the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month, with the figures in parenthesis the most likely range of the change indicated; in other words, January housing starts could have been up by 9.7% or down by as much as 16.9% from those of December, with revisions of a greater magnitude in either direction possible…in this report, the annual rate for December housing starts was revised from the 1,608,000 reported last week to a 13 year high of 1,626,000, while November starts, which were first reported at a 1,365,000 annual rate, were revised from last week’s initial revised figure of 1,375,000 to a rate of 1,381,000 annually….

The 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 109,100 housing units were started in January, down from the revised 109,700 units that were started in December, but up from the 103,400 units that were started in November…of those housing units started in January, an estimated 68,600 were single family homes and 39,800 were units in structures with more than 5 units, down from the revised 69,400 single family starts in December but up from the 38,600 units started in structures with more than 5 units in December…

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 January, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,551,000, which was a 13 year high for permits, 9.2 percent (±2.1 percent) above the revised December rate of 1,420,000 permits, and 17.9 percent (±1.3 percent) above the 1,316,000 a year rate of building permit issuance in January a year earlier…the annual rate for housing permits issued in December was revised from the 1,416,000 reported last month to 1,420,000….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 roughly 113,000 housing units were issued in January, up from the revised estimate of 107,300 new permits issued in December….of those, 70,400 were permits for single family homes and 39,600 were permits for units in structures of more than 5 units, up from the 63,000 single family permits in December, but down from the 41,200 permits for units in structures of more than 5 units….for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.567 Million Annual Rate in January and Comments on January Housing Starts

Existing Home Sales Fell 1.3% in January

The National Association of Realtors (NAR) reported that existing home sales fell by 1.3% from December to January on a seasonally adjusted basis, projecting that 5.46 million existing homes would sell over an entire year if the January home sales pace were extrapolated over that year, a pace that was still 9.6% above the annual sales rate projected in January of a year ago…December home sales are now shown to have been running at a 5.53 million annual rate, revised down from the 5.54 million annual rate indicated by last month’s report…the NAR also reported that the median sales price for all existing-home types was $266,300 in January, 6.8% higher than in January a year earlier, which they report “marks 95 straight months of year-over-year gains“…..the NAR press release, which is titled “Existing-Home Sales Drop 1.3 Percent in January“, 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 read about them 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 usually take look at the raw data overview (pdf) to see what actually happened during the month…this unadjusted data indicates that roughly 318,000 homes sold in January, down by 26.7% from the 434,000 homes that sold in December, but up 11.6% from the 285,000 homes that sold in January of last year, so we can see the effect of that large mid-winter seasonal adjustment…that same pdf indicates that the median home selling price for all housing types fell 3.0%, from a revised $274,500 in December to $266,300 in January, while the average home sales price was $302,700 in January, down 2.7% from the $311,000 average sales price in December, but up 5.0% from the $288,200 average home sales price of January 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 5.46 million in January and Comments on January 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…)      

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