3rd quarter GDP revision, October income and outlays, and new home sales

The key economic reports released over the past week were the 2nd estimate of 3rd quarter GDP and the October report on Personal Income and Spending, both from the Bureau of Economic Analysis; other widely watched releases included the October report on new home sales from the Census bureau and the Case-Shiller Home Price Index for September from S&P Case-Shiller, an index generated by averaging relative home sales prices from July, August and September of this year against a January 2000 baseline…they reported that home prices nationally for those 3 months averaged 5.5% higher than prices for the same homes that sold during the same 3 month period a year earlier, down from the 5.7% year over year index increase shown in the prior report…

The week also saw the release of the Chicago Fed National Activity Index (CFNAI) for October, a weighted composite index of 85 different economic metrics, which rose to +0.24 in October from +0.14 in September, revised from the +0.17 that had been reported for September last month….as a result, the 3 month average of the CFNAI rose to +0.31 in October, up from a revised +0.30 in September, which indicates that national economic activity has been somewhat above the historical trend over those recent months….

In addition, the week brought us the last two regional Fed manufacturing surveys for November; the Richmond Fed Survey of Manufacturing Activity for November, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index slipped to +14 in November, down from +15 in October, still suggesting an ongoing expansion of that region’s manufacturing, while the Dallas Fed Texas Manufacturing Outlook Survey reported its general business activity index fell to +17.6 in November from +29.4 in October, indicative of a moderation of the expansion of the Texas economy…

3rd Quarter GDP Grew at a 3.5% Rate, but Two-Thirds of That was Inventories

The Second Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 3.5% rate in the quarter, revised but statistically unchanged from from the 3.5% growth rate reported in the advance estimate a month ago, largely because downward revisions to personal consumption, exports, and state and local spending were completely offset by upward revisions to non-residential fixed investment and inventory investment….in current dollars, our third quarter GDP grew at a 4.96% annual rate, increasing from what would work out to be a $20,411.9 billion a year output rate in the 2nd quarter to a $20,660.3 billion annual rate in the 3rd quarter, with the headline 3.5% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 1.7%, aka the GDP deflator, was applied to the current dollar change….

Remember 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 a quantity indexes than as 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 we find on the BEA GDP landing page, which also offers links to just the tables on Excel and other technical notes…specifically, we reference table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 3rd quarter of 2013; table 2, which shows the contribution of each of the components to the GDP figures for those months 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 3rd quarter advance estimate, which this estimate revises, is here

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 4.0% growth rate reported last month to a 3.6% rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 5.19% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated inflation grew at a 1.5% annual rate in the 3rd quarter, which was revised from the 1.6% PCE inflation rate reported a month ago…real consumption of durable goods grew at a 3.9% annual rate, which was revised from the 6.9% growth rate shown in the advance report, and added 0.28 percentage points to GDP, as consumption of motor vehicles was revised to show a small contraction while an increase in real consumption of recreational goods and vehicles at a 9.1% rate accounted for more than half the durables goods  increase…real consumption of nondurable goods by individuals grew at a 5.3% annual rate, revised from the 5.2% growth rate reported in the 1st estimate, and added 0.73 percentage points to the 3rd quarter’s economic growth rate, as slightly lower consumption of energy goods was more than offset by greater consumption of food, clothing and other non-durables….at the same time, consumption of services rose at a 3.1% annual rate, revised from the 3.2% growth rate reported last month, and added 1.45 percentage points to the final GDP tally, as real health care services rose at a 4.2% rate and accounted for a third of the quarter’s growth in services…

Meanwhile, seasonally adjusted real gross private domestic investment grew at a 15.1% annual rate in the 3rd quarter, revised from the 12.0% growth estimate reported last month, as real private fixed investment grew at a 1.4% rate, revised from the 0.3% contraction rate reported in the advance estimate, while inventory growth was greater than previously estimated…investment in non-residential structures was revised to show contraction at a 1.7% rate, not as bad as the 7.9% contraction rate previously reported, and real investment in equipment was revised from growth at a rate of 0.4% to growth at a 3.5% rate, while the quarter’s investment in intellectual property products was revised from growth at a 7.9% rate to growth at a 4.3% rate…on the other hand, real residential investment was shown to be shrinking at a 2.6% annual rate, rather than the 4.0% contraction rate previously reported…after those revisions, the decrease in investment in non-residential structures subtracted 0.05 percentage points from the 3rd quarter’s growth rate, the increase in investment in equipment added 0.21 percentage points to the quarter’s growth rate, lower residential investment subtracted 0.10 percentage points from GDP, while growth in investment in intellectual property added 0.19 percentage points to the growth rate of 3rd quarter GDP…

In addition, investment in real private inventories grew by an inflation adjusted $86.6 billion in the 3rd quarter, revised from the originally reported $76.3 billion of real inventory growth…this came after inventories had shrunk at an inflation adjusted $36.8 billion rate in the 2nd quarter, and hence the $123.5 billion increase in real inventory growth added 2.27 percentage points to the quarter’s growth rate, revised from the 2.07 percentage point addition from inventory growth that was indicated in the advance estimate….since growth in inventories indicates that more of the goods produced during the quarter were left in warehouses or “sitting on the shelf”, their QoQ increase by $123.5 billion meant that growth of real final sales of GDP was relatively smaller by that much, and hence real final sales of GDP only rose at a 1.2% rate in the 3rd quarter, down from the real final sales growth rate of 5.4% in the 2nd quarter, when the decrease in inventory growth meant that growth in real final sales was greater than the real growth in GDP…

The previously reported decrease in real exports was revised even lower with this estimate, while the previously reported increase in real imports was revised a bit higher, and as a result the change in our net trade was a greater subtraction from GDP rather than was previously reported…our real exports shrunk at a 4.4% rate rather than the 3.5% rate reported in the first 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, their shrinkage conversely subtracted 0.55 percentage points from the 3rd quarter’s growth rate, revised from the 0.45 percentage point subtraction shown in the previous report….meanwhile, the previously reported 9.1% increase in our real imports was revised to a 9.2% increase, and since imports are subtracted from GDP because they represent either consumption or investment that was not produced here, their decrease subtracted 1.36 percentage points to 3rd quarter GDP, rather than the 1.34 percentage point subtraction shown last month….thus, our deteriorating trade balance subtracted a total of 1.91 percentage points from 3rd quarter GDP, rather than the (rounded) 1.78 percentage point subtraction that had been indicated by the advance estimate..

Finally, the entire government sector grew at a 2.6% rate, revised from the 3.3% growth rate previously reported, as federal government consumption and investment grew a bit more than initially estimated, while real state & local government consumption and investment grew somewhat slower than had been indicated….real federal government consumption and investment was seen to have grown at a 3.5% rate from the 2nd quarter in this estimate, revised from the 3.3% growth rate shown in the advance estimate, as real federal outlays for defense grew at a 4.9% rate and added 0.18 percentage points to 3rd quarter GDP, revised from the 4.6% growth rate shown previously, while all other federal consumption and investment grew at an unrevised 1.5% rate and added 0.04 percentage points to 3rd quarter GDP….meanwhile, real state and local consumption and investment grew at a 2.0% rate in the quarter, which was revised from the 3.2% growth rate reported in the 1st estimate, and added 0.22 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…

Personal Income up 0.5% in October, Personal Spending up 0.6%, PCE Price Index up 0.2%

The October report on Personal Income and Outlays from the Bureau of Economic Analysis includes the month’s data for our personal consumption expenditures (PCE), which accounts for roughly 69.4% of the month’s GDP, and with it 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…in addition, this release reports our 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 is not the current monthly change; rather, they’re seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much income and spending would change over a year if October’s change in seasonally 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 September to October….

Thus, when the opening line of the news release for this report tell us “Personal income increased $84.9 billion (0.5 percent) in October “, they mean that the annualized figure for seasonally adjusted personal income in October, $17,776.0 billion, was $84.9 billion, or a bit less than 0.5% greater than the annualized personal income figure of $17,691.1 billion extrapolated for September; the actual, unadjusted change in personal income from September to October is not given…at the same time, annualized disposable personal income, which is income after taxes, rose by a bit more than 0.5%, from an annual rate of $15,618.8 billion in September to an annual rate of $15,700.5 billion in October…the monthly contributors to the increase in personal income, which can be viewed in detail in the Full Release & Tables (PDF) for this release, are also annualized…in October, the largest contributors to the $84.9 billion annual rate of increase in personal income were a $27.8 billion increase in wages and salaries and a $25.2 billion increase in farm and business proprietors’ incomes…

For the personal consumption expenditures (PCE) that we’re most interested in, BEA reports that they increased at a $86.9 billion rate, or by more than 0.6%, as the annual rate of PCE rose from $14,090.6 billion in September to $14,177.5 in October….September PCE was revised from $14,124.2 billion annually to $14,090.6 billion, a revision that was already included in the 2nd estimate of 3rd quarter GDP which we just reviewed (this report, although usually released a business day later than the GDP release, is computed concurrently)….total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $90.8 billion to $14,732.7 billion annually in October, which left total personal savings, which is disposable personal income less total outlays, at a $967.8 billion annual rate in October, down a bit from the revised $976.9 billion annualized personal savings in September… as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, slipped to 6.2% in October from the revised September savings rate of 6.3%…

As you know, before personal consumption expenditures are used in the computation of GDP, they must first be 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….that’s done with the price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is included in Table 9 in the pdf for this report…that index was at 108.772 in October, up from 108.576 in September, giving us a PCE price index change and inflation adjustment of 0.1805% in October, which the BEA rounded to +0.2% for the press release…note that when the PCE price indexes are applied to a given month’s annualized PCE in current dollars, it yields that month’s annualized real PCE in those 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 that of another….that result is shown in table 7 of the PDF, where we see that October’s chained dollar consumption total works out to 13,034.7 billion annually, 0.4361% more than September’s 12,978.1 billion, a difference that the BEA reports as +0.4%…

However, to estimate the impact of the change in October PCE on the change in GDP, the month over month change in PCE doesn’t help us much, since GDP is reported quarterly…thus we have to compare October’s real PCE to 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 quarterly annualized chained dollar PCE for those three months in table 8 of the pdf for this report, where we find that the annualized real PCE for the 3rd quarter was represented by 12,957.2 billion in chained 2012 dollars..(ie, that’s the same as what’s shown in table 3 of the pdf for the 3rd quarter GDP report)….when we compare October’s real PCE representation of 13,034.7 billion to the 3rd quarter real PCE figure of 12,957.2 billion, we find that October real PCE has grown at a 2.41% annual rate from that of the 3rd quarter….that would mean that even if October real PCE does not improve during November and December, growth in PCE would still add 1.68 percentage points to the GDP growth rate of the 4th quarter…

New Home Sales Down in October After Prior Months Sales Revised Higher

The Census report on New Residential Sales for October (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 544,000 homes annually, which was 8.9 percent (±13.7 percent)* below the revised September rate of 597,000 new single family home sales annually and 12.0 percent (±13.1 percent)* below the estimated annual rate that new homes were selling at in October of last year….the asterisks indicate that based on their small sampling, Census could not be certain whether October new home sales rose or fell from those of September, or even from those of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the  largest margin of error and is subject to the largest revisions of any census construction series….with this report; sales of new single family homes in  September were revised from the annual rate of 553,000 reported last month up  to a 597,000 a year rate, while home sales in August, initially reported at an annual rate of 629,000 and revised to a 585,000 a year rate last month, were revised to a 591,000 a year rate with this report, and while July’s home sale rate, initially reported at an annual rate of 627,000 and revised from a 608,000 a year rate to a 603,000 a year rate last month, were revised up to a 606,000 annual rate with this release..

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 42,000 new single family homes sold in October, down from the estimated 45,000 new homes that sold in September and down from the 49,000 homes that sold in October a year ago…..the raw numbers from Census field agents further estimated that the median sales price of new houses sold in October was $309,700, down from the median sale price of $321,300 in September and down from the median sales price of $319,500 in October a year ago, while the average new home sales price in October was $395,000, up from the $379,000 average sales price in September, and up from the average sales price of $394,000 in October a year ago….a seasonally adjusted estimate of 336,000 new single family houses remained for sale at the end of October, which represents a 7.4 month supply at the October sales rate, up from the revised 6.5 months of new home supply in September…for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales decrease to 544,000 Annual Rate in October and A few Comments on October New 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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tables and graphs for December 1st

rig count summary:

November 30 2018 rig count summary

natural gas storage:

December 1 2018 natural gas in storage thru November 23

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oil prices drop most since 2014; natural gas supplies drop most ever in mid-November, to a 16 year low for the date..

oil prices were lower for a 7th consecutive week, with this week’s losses accelerating to the largest weekly drop since December 2014…after falling 6.2% to $56.46 barrel on a building oil glut last week, prices of US oil for December delivery initially fell to as low as $55.05 on Monday after the Russian Energy Minister hedged on cutting oil output, but recovered to end 30 cents higher $56.76 a barrel, as trading in the December oil contract expired…at the same time, the contract for January delivery of US crude, which ended the prior week at $56.68 a barrel, rose 52 cents to $57.20 a barrel, with IEA warnings on Saudi output capacity offsetting fears of Russian overproduction…now quoting January oil, prices plummeted on Tuesday as fears of a supply glut returned, falling a total of $3.77 or 6.6% to $53.43​ a barrel​, as a global stock market selloff raised the specter of ​decreasi​ng demand due to a deteriorating global economy…prices recovered a part of the prior day’s losses on Wednesday, as expectations for a production cut at an early December OPEC meeting helped prices recoup, with oil ending $1.20 higher at $54.63 a barrel…while US markets were closed for the holiday, US oil prices fell in European trading on Thursday, and that selloff carried into Friday trading in the US, with oil prices initially plunging 8 percent to their lowest level in 13 months before ending the day near their lows at $50.42​ a barrel​, a 7.7% drop for the day, in a week that saw losses in excess of 11%, even as OPEC producers considered cutting production to stem the rising global ​oil ​surplus

with yet another big drop in oil prices, we’ll include a graph of US oil prices over the past two years, so you can get a sense of what the recent​ oil​ price drop looks like compared to ​its historical volatility…

November 24 2018 weekly oil prices

the above graph is a Saturday afternoon screenshot of the interactive US oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets…each bar on the above graph represents oil prices for a week of oil trading between October, 2016 and this past week, wherein the green bars represent the weeks when the price of oil went up, and red bars represent the weeks when the price of oil went down…for green bars, the starting oil price at the beginning of the week is at the bottom of the bar and the price at the end of the week is at the top of the bar, whereas for red or down weeks, the starting price is at the top of the bar and the price of oil at the end of the week is at the bottom of the bar…also slightly visible on this “candlestick” style graph are the faint grey “wicks” above and below each bar, to indicate trading prices during the week that were above or below the opening to closing price range for that week…as you can see, the oil price collapse of last 7 weeks has completely reversed the long rally in prices that began in the second week of October 2017….​(​note that since this graph includes off market and after hours trading, the prices shown above do not correspond exactly to the  NYMEX exchange prices we have been quoting..​.)​

​meanwhile, ​the volatility in natural gas prices that we saw last week continued into this one, but prices​ ​actually ended the week with little change….natural gas for December delivery initially jumped 42.8 cents higher to $4.700 per mmBTU on Monday’s forecasts of colder weather, but then dropped 42.6 cents early Tuesday before reversing and ending ​the day ​with a loss of just 17.7 cents at 4.523 per mmBTU…the price action on Wednesday was in the opposite direction, with prices jumping to as high as $4.864 per mmBTU on a record early withdrawal of natural gas from storage, before those gains were reversed and natural gas ended the day with a loss of 7.2 cents at $4.451 per mmBTU…prices then fell another 14.3 cents on Friday to end the week at $4.308 per mmBTU, just 3.8 cents higher than where they started…

the natural gas storage report for the week ending November 16th from the EIA showed that natural gas in storage in the US fell by 134 billion cubic feet to 3,113 billion cubic feet over the week, which left our gas supplies 620 billion cubic feet, or 16.6% below the 3,733 billion cubic feet that were in storage on November 17th of last year, and 710 billion cubic feet, or 18.6% below the five-year average of 3,823 billion cubic feet of natural gas that are typically in storage on the third weekend of November….this week’s 134 billion cubic feet withdrawal from US natural gas supplies was quite a bit more than the 92 to 121 billion cubic feet withdrawal that analysts had been expecting, and way more than the average of 25 billion cubic feet of natural gas that have been withdrawn from storage during the second full week of November in recent years, as it was the largest withdrawal of this size this early in the heating season in history; in fact, many years have not seen a natural gas withdrawal that large for the entire month of November…natural gas storage facilities in the Midwest saw a 32 billion cubic feet drop in supplies over the week, which increased the region’s gas supply deficit to 12.0% below normal, and natural gas supplies in the East also fell by 32 billion cubic feet as their supply deficit rose to 11.7% below normal for this time of year…meanwhile, the South Central region saw a 55 billion cubic feet drop in their supplies, as their natural gas storage deficit jumped to 26.8% below their five-year average for the third weekend of November…at the same time, 8 billion cubic feet were pulled out of natural gas supplies in the Pacific region as their deficit from normal rose to 27.2%, while 7 billion cubic feet were withdrawn from storage in the Mountain region, where their natural gas supply deficit rose to 20.2% below normal for this time of year…. 

compared to other mid November low storage readings, this week’s 3,113 billion cubic feet of natural gas in storage was 13.4% lower than the previous 5 year low of 3,594 billion cubic feet that was set on November 14th of 2014, 10.8% below the 10 year low of 3,488 billion cubic feet that was hit on November 14th of 2008, 4.9% below the 3,274 billion cubic feet of natural gas we had in storage on November 18th of 2005, and 1.3% below the 3155 billion cubic feet that were in storage to start the winter on November 14th of 2003…we have to go back​ 16 years,​ to November 15th 2002, when 3,096 billion cubic feet of natural gas were in storage, to find a lower quantity of natural gas in storage in mid-November than now….

for a visualization of what this week’s natural gas withdrawal looks like historically, we have a graphic showing this year’s weekly change in natural gas inventories as compared to last year’s and to the long term averages:

November 21 2018 change in nat gas inventories thru Nov 16

the above graph was copied from a blog post at Bespoke Weather that was published on Wednesday of this week, shortly after the early release of the natural gas storage report…on this graph, purple shows this year’s weekly additions to natural gas storage in billions of cubic feet above the zero line, and this year’s weekly withdrawals from natural gas storage in billions of cubic feet below the zero line; similarly, weekly additions and withdrawals of natural gas in 2017 are shown in red, the 5 year average weekly change of natural gas in storage is shown in green, and the historical average weekly change of natural gas supplies in EIA data going back to 1992 is shown in orange…at the far left, you can see the record withdrawal of 359 billion of cubic feet that used 11.5% of all the natural gas we had on hand during the first week in January​ of this year​, and a withdrawal of 288 billion cubic feet during the third week of January that would have also been a record withdrawal if not for the first week; those 2 big withdrawals thus dropped our natural gas supplies to 17.5% below normal to start the year…the cold April further reduced supplies vis a vis normal, as you can see that the averages show we should have been adding to supplies at that time of year….through most of the summer, our additions to storage were fairly close the normal range, but by then the stage had already been set for natural gas supplies to be at a 15 year low to start this winter…

to see what kind of temperature factors caused this week’s large withdrawal, and what kind of temperatures will be influencing next week’s natural gas supply report, we’ll next look at the most recent average temperature summary from the EIA’s natural gas storage dashboard:

November 24 2018 daily average temps thru Nov 22nd

the above graphic from the EIA’s natural gas storage dashboard gives us both the average daily temperature from November 9th thru November 22nd in each of the five natural gas regions, as well as a color-coded variance from normal for each of those daily temperature averages, with shades of brown indicating the average temperatures in the region were above normal on a given date, while shades of blue indicate average temperatures that were below normal for the date, as indicated in the legend at the bottom….thus this graphic gives us not only the actual average temperature for each region for each day, but also indicates how much that temperature deviated from the norm…as you can see, temperatures for every region except for the 3 Pacific states were below normal through the week ending November 16th, with both the Midwest and South Central regions, encompassing the large expanse in the middle of the country, between 15 and 19 degrees below normal on three separate days in the period…the following week, which will be reported on next week, looks a bit warmer, but not by much, as if you look at the lower line on the graphic you’ll see national average temperature only rose from an average of around 42 degrees ​during the week ending November 16th ​to ​around ​44 degrees​ in the week after that​, which means we can expect another large withdrawal this coming week​,​ as consumption of natural gas for heating continues apace…

while average temperatures as shown above give us a general idea of the heating requirements over a given period, their relationship is inexact because they don’t differentiate between broad sparsely populated regions of the country where heating demand might be minimal even if it is cold, and the larger cities where a cold snap would result in a large burn of natural gas for heat…moreover, an average temperature for a region like the East above, which includes all the states from Maine to Florida, tells us little about what parts of that region are seeing the heating demand corresponding to the average temperatures….for a better measure of heating demand, utilities and suppliers of heating fuels use a metric called ​heating ​degree days to determine what the daily demand for heating will be, so they can adjust their production or delivery schedules accordingly…those degree days are computed by taking the average daily temperature for a location and subtracting that number from 65 degrees, which is considered to be the temperature when most buildings will start to need heating…hence, the colder it gets, the higher the degree day factor​ becomes​, and hence ​it’s a effective measure of ​heating demand…thus this next graphic, which shows us population weighted heating demand for the entire country, is much more useful in determining the ultimate consumption of natural gas…

November 23 2018 population weighted heating demand

the above graph came from a Thursday email titled “Best in Energy” that John Kemp, senior energy analyst and columnist with Reuters, sends out free​ ​daily, on request…in this graphic, the yellow graph shows the average degree days that have been needed per capita each day over the typical US heating season (starting with zero in July), while the red dots indicate the actual population weighted degree days for each day of the 2018-2019 heating season…in addition, the graph also include​s 7 white dots which are a forecast of population weighted degree days that will determine heating requirements for the next 7 days…John did not indicate the exact date for this graph, but since the first white dot shows a large spike, i’m guessing that would ​probably ​be ​for ​Thanksgiving day, when New York city and most of the Northeast saw their coldest Thanksgiving in 150 years…thus the red dots would represent the days prior to November 21st, ​with ​all ​the recent ones clustered ​roughly ​between 20 and 25 degree days per capita nationally, indicating heating requirements that would normally be more typical of mid-December…

the next graph, also from that John Kemp emailing, shows the cumulative heating degree day deviation from normal, up to and including this reporting week… 

November 23 2018 heating demand deviation from normal

in this graph, the divergence of cumulative heating degree days from normal for this year and for each of the previous three heating seasons is shown daily, with the current year shown as a solid white line, with last year’s divergence shown as a solid yellow line, with the divergence from normal for the 2016/2017 heating season shown as a dashed yellow line, and with the divergence from normal of the 2015/2016 heating season shown as a dotted yellow line…note that the graphs for all three prior years trend downward, or negative from zero, because all three years experienced warmer than normal temperatures, and hence less degree days than normal…however, after a warmish October, when this year’s heating requirements were also below normal, the white line for 2018-19 has now moved upwards into positive territory, meaning this year’s cumulative heating requirements are now running above normal…the broader takeaway from this graph, though, is that the natural gas demand we saw over the past three years is not a good benchmark for what we’ll need this year, because those years were warmer than normal, with the heating needs of both 2015/2016 and 2016/2017 roughly 17% below normal…as we pointed out four weeks ago, if our natural gas usage this winter is instead similar to that of 2014, our natural gas supplies could fall to below 200 billion cubic feet by the end of the heating season, implying widespread natural gas shortages and much higher prices….

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, referencing the week ending November 16th, indicated a large increase in the amount of of oil used by refineries while oil imports, oil exports, and oil production were relatively little changed, and hence there was an smaller addition to our commercial crude supplies than the prior week, but the 9th increase in a row​ nonetheless​…our imports of crude oil rose by an average of 102,000 barrels per day to an average of 7,554,000 barrels per day, after falling by an average of 87,000 barrels per day the prior week, while our exports of crude oil fell by an average of 81,000 barrels per day to an average of 1,969,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,585,000 barrels of per day during the week ending November 16th, 183,000 more barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was reportedly unchanged at 11,700,000 barrels per day, so our daily supply of oil from the net of our trade in oil and from wells totaled an average of 17,285,000 barrels per day during this reporting week…

meanwhile, US oil refineries were using 16,855,000 barrels of crude per day during the week ending November 16th, 423,000 barrels per day more than the amount of oil they used during the prior week, while over the same period a net of 584,000 barrels of oil per day were reportedly being added to the total amount of oil that’s in storage in the US….hence, this week’s crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 154,000 barrels per day short of what refineries reported they used during the week plus what oil was added to storage….to account for that disparity between the supply of oil and the consumption or new storage of it, the EIA inserted a (+154,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as “unaccounted for crude oil”…(for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports slipped to an average of 7,472,000 barrels per day, now 2.7% less than the 7,680,000 barrel per day average that we were importing over the same four-week period last year….the net 584,000 barrel per day increase in our total crude inventories included a 693,000 barrel per day increase in our commercially available stocks of crude oil, which was partly offset by a 109,000 barrel per day decrease in the amount of oil in our Strategic Petroleum Reserve, likely part of a sale of 11 million barrels from those reserves to Exxon et al that closed two and a half months earlier….this week’s crude oil production was reported as unchanged at 11,700,000 barrels because the rounded figure for output from wells in the lower 48 states was unchanged at 11,200,000 barrels per day, while a 4,000 barrel per day increase to 503,000 barrels per day in oil output from Alaska was not enough to change the rounded national total…last year’s US crude oil production for the week ending November 17th was at 9,658,000 barrels per day, so this week’s rounded oil production figure was 21.1% above that of a year ago, and 38.8% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…  

US oil refineries were operating at 92.7% of their capacity in using 16,855,000 barrels of crude per day during the week ending November 16th, up from 90.1% of capacity the prior week, and the highest refinery utilization rate for mid-November since 2004….the 16,855,000 barrels per day of oil that were refined this week were at a seasonal high for the time of year for the 22nd time out of the past 25 weeks, but were only fractionally higher than the 16,838,000 barrels of crude per day that were being processed during the week ending November 17th, 2017, when US refineries were operating at 91.3% of capacity… 

even with the big jump in the amount of oil being refined, gasoline output from our refineries was a bit lower, decreasing by 20,000 barrels per day to 10,036,000 barrels per day during the week ending November 16th, after our refineries’ gasoline output had increased by 342,000 barrels per day during the week ending November 9th…with that slack in this week’s gasoline output, our gasoline production during the week was thus 3.8% lower than the 10,432,000 barrels of gasoline that were being produced daily during the same week last year….on the other hand, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 208,000 barrels per day to 5,201,000 barrels per day, after that output had increased by 30,000 barrels per day the prior week….nonetheless, the week’s distillates production was still 2.5% lower than the 5,335,000 barrels of distillates per day that were being produced during the week ending November 17th 2017…. 

with our gasoline production little changed, our supply of gasoline in storage at the end of the week fell by 1,295,000 barrels to 225,315,000 barrels by November 16th, the 5th decrease in the past 6 weeks, thus ​shrinking our gasoline supplies by 10,857,000 barrels since the first week of October….our gasoline supplies fell again in part because our exports of gasoline rose by 145,000 barrels per day to 885,000 barrels per day, while our imports of gasoline fell by 6,000 barrels per day to another 13 month low of 247,000 barrels per day, and while the amount of gasoline supplied to US markets fell by 7,000 barrels per day to 9,185,000 barrels per day…but even after falling most of the fall, our gasoline inventories are still at a seasonal high, 7.1% higher than last November 17th’s level of 210,475,000 barrels, and roughly 7.6% above the 10 year average of our gasoline supplies for this time of the year

even with the big jump in our distillates production, our supplies of distillate fuels fell for the 9th week in a row, but only by 77,000 barrels to 119,191,000 barrels during the week ending November 16th, after our distillates supplies had fallen by 11,108,000 barrels over the prior three weeks…our distillates supplies fell again even though the amount of distillates supplied to US markets, a proxy for our domestic demand, decreased by 363,000 barrels per day to 4,270,000 barrels per day, and as our imports of distillates rose by 201,000 barrels per day to 104,000 barrels per day, while our exports of distillates fell by 132,000 barrels per day to 1,046,000 barrels per day…after this week’s decrease, our distillate supplies ended the week 4.7% below the 125,032,000 barrels that we had stored on November 1​7th, 2017, and were roughly 8.4% below the 10 year average of distillates stocks for this time of the year…       

finally, even with big increase in oil refining, our commercial supplies of crude oil increased for the 9th week in a row and now for the 25th time in 2018, rising by 4,851,000 barrels during the week, from 442,057,000 barrels on November 9th to 446,908,000 barrels on November 16th…that increase means that our crude oil inventories are now roughly 6% above the five-year average of crude oil supplies for this time of year, and roughly 28.1% above the 10 year average of crude oil stocks for the third weekend in November, with the disparity between those figures arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…however, since our crude oil inventories had been falling through most of the past year and a half until just recently, our oil supplies as of November 16th were still 2.2% below the 457,142,000 barrels of oil we had stored on November 17th of 2017, 8.6% below the 489,029,000 barrels of oil that we had in storage on November 18th of 2016, and 2.0% below the 456,035,000 barrels of oil we had in storage on November 13th of 2015..

This Week’s Rig Count

​with the Thanksgiving weekend, this week’s rig count was reported on Wednesday rather than Friday and thus only covers 5 days….with that qualification, ​US drilling rig activity decreased for the third time in 9 weeks during the week ending November ​21st, as lower oil prices may be starting to influence decisions to restart rigs that are not already under contract…Baker Hughes reported that the total count of rotary rigs running in the US decreased by 3 rigs to 1079 rigs over the week ending on Friday, which was still 156 more rigs than the 923 rigs that were in use as of the November ​22nd report of 2017, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC ​announced their attempt to flood the global oil market…  

the count of rigs drilling for oil decreased by 3 rigs to 885 rigs this week, which was still 138 more oil rigs than were running a year ago, while it remained well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014…at the same time, the number of drilling rigs targeting natural gas formations was unchanged at 194 rigs, which was 18 more than the 176 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008…

offshore drilling in the Gulf of Mexico increased by 3 rigs to 25 rigs this week, which was also 3 more rigs than the 22 rigs active ​in the ​Gulf of Mexico a year ago…with no other offshore US drilling being done elsewhere either this week or a year ago, those Gulf of Mexico totals are also equal to the national offshore rig count totals…. 

the count of active horizontal drilling rigs decreased by 10 rigs to 929 horizontal rigs this week, which was still 143 more horizontal rigs than the 786 horizontal rigs that were in use in the US on November 24th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…on the other hand, the directional rig count increased by 2 to 73 directional rigs this week, which was also up from the 71 directional rigs that were in use during the same week of last year….in addition, the vertical rig count increased by 5 rigs to 77 vertical rigs this week, which was also up from the 66 vertical rigs that were operating on November 24th of 2017…  

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of November ​21st, the second column shows the change in the number of working rigs between last week’s count (November 16th) and this week’s (November ​21st) count, the third column shows last week’s November 16th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running on the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on ​Wednesday the 22nd of November, 2017…

November 21 2018 rig count summary

​despite the removal of three rigs from the Texas Delaware basin, drilling in the greater Permian basin was unchanged, because 3 rigs were added to the Delaware on the New Mexico side of the state line…meanwhile, the 3 rig decrease in North Dakota despite the single rig decrease in the Williston basin leads to most noteworthy outlier in this ​week’s count; that being that 2 more rigs were added in the Williston on the Montana side of the border, where there are now 4 rigs active, the most activity in Montana since February 2015; a year ago, there were 2 rigs active there…

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October’s durable goods, new housing starts, and existing home sales

Widely watched reports released this week included the Advance Report on Durable Goods for October and the October report on New Residential Construction, both from the Census bureau, and the Existing Home Sales Report for October from the National Association of Realtors (NAR)…

October Durable Goods: New Orders Down 4.4%, Shipments Down 0.6%, Inventories Unchanged

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for October (pdf) from the Census Bureau reported that the value of the widely followed new orders for manufactured durable goods decreased by $11.5 billion or 4.4 percent to $248.5 billion in October, after September’s new orders were revised from the $262.1 billion reported last month to $260.0 billion, now a 0.1% decrease from August, rather than the 0.8% increase previously reported…year to date new orders are still 8.7% above those of 2017, down from the +8.9% year over year change we saw in this report last month….the volatile monthly change in new orders for transportation equipment was responsible for the October orders drop, as new transportation equipment orders fell $11.7 billion or 12.2 percent to $84.7 billion, on a 59.3% decrease to $4,710 million in new orders for defense aircraft and a a 21.4% decrease to $10,499 million in new orders for commercial aircraft….excluding orders for transportation equipment, other new orders rose 0.1%, while excluding just new orders for defense equipment, new orders fell 1.2%….meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell by a statistically insignificant $31 million to $69,356 million…

At the same time, the seasonally adjusted value of October shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for any changes in prices, decreased by $1.4 billion or 0.6 percent to $254.5 billion, after September shipments were revised from $256.8 billion to $255.9 billion, now up just 1.0% from August…shipments of transportation equipment were down $1.6 billion or 1.8 percent to $87.6 billion, while all other durable goods shipments showed a 0.1% increase…of those, shipments of nondefense capital goods less aircraft rose 0.3% to $68.8 billion, after September capital goods shipments were revised 0.3% lower..

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for the 2nd time in 3 months, but only by $0.1 billion to $410.9 billion, after September inventories were revised from $410.7 billion to $411.0 billion, now up 0.8% from August…a $0.4 billion or 1.0 percent decrease to $43.1 billion in inventories of computers and electronic products was responsible for the inventories decrease, while the value of transportation equipment inventories rose 0.4% to $131.0 billion…

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, decreased for the first time in 9 months, falling by $2.0 billion or 0.2 percent to $1,183.0 billion, after September unfilled orders were revised from $1,186.1 billion to $1,185.051 billion, now a 0.7% increase from August….a $2.9 billion or 0.4 percent decrease to $815.1 billion in unfilled orders for transportation equipment was responsible for the October decrease, as unfilled orders excluding transportation equipment orders were up 0.2% to $367,943 million…compared to a year earlier, the unfilled order book for durable goods is still 4.8% above the level of last October, with unfilled orders for transportation equipment still 4.7% above their year ago level, largely on a 10.5% increase in the backlog of orders for defense aircraft…. 

Little Change in Housing Starts and Building Permits in October

The October 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 1,228,000 units during the month, which was 1.5 percent (±12.9 percent)* above the revised September estimated annual rate of 1,210,000 housing unit starts, but was still 2.9 percent (±10.4 percent)* below last October’s pace of 1,265,000 housing starts a year…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell from September or even from those in October a year ago, with the figures in parenthesis the most likely range of the change indicated; in other words, in other words, October’s housing starts could have been down by 11.4% or up by as much as 14.4% from those of September, with even larger revisions possible after a number of months…with this report, the annual rate for September housing starts was revised from the 1,201,000 reported last month to 1,210,000, and the annual rate for August housing starts, which was revised from 1,282,000 to 1,268,000 last month, was revised back up to 1,280,000 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 107,300 housing units were started in October, up from the 106,900 units that were started in September…of those housing units started in October, an estimated 74,600 were single family homes and 30,900 were units in structures with more than 5 units, down from the revised 75,300 single family starts in September, and down from the 31,000 units started in structures with more than 5 units in September…

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 October, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,263,000 housing units, which was 0.6 percent (±2.4 percent)* below the September rate of 1,270,000 permits, and was 6.0 percent (±1.6 percent) below the rate of building permit issuance in October a year earlier…the annual rate for housing permits issued in September was revised from 1,241,000 to 1,270,000….again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates provided monthly by canvassing census agents, which indicated that permits for 112,500 housing units were issued in October, up from the revised estimate of 99,400 new permits issued in September…the October permits included 74.200 permits for single family homes, up from 65,000 single family permits issued in September, and 34,800 permits for housing units in apartment buildings with 5 or more units, up from 31,100 such multifamily permits a month earlier…

For more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts Increased to 1.228 Million Annual Rate in October and Comments on October Housing Starts..

Existing Home Sales Rose 1.4% in October

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 1.4% from September to October, the first increase in 7 months, projecting that 5.22 million existing homes would sell over an entire year if the October home sales pace were extrapolated over that year, a pace that was still 5.1% below the 5.50 million annual sales rate projected in October of a year ago…September sales, indicated at a 5.15 million annual rate, were revised but were statistically unchanged from last month’s report…the NAR also reported that the median sales price for all existing-home types was $255,400 in October, 3.8% higher than in October a year earlier, which they report as “the 80th straight month of year-over-year gains“…..the NAR press release, which is titled “Existing-Home Sales Increase for the First Time in Six Months” even though it was the first time in seven months, 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 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 like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month…this unadjusted data indicates that roughly 446,000 homes sold in October, up by 5.9% from the 421,000 homes that sold in September, but down by 2.6% from the 458,000 homes that sold in October of last year, so we can see that the seasonal adjustment reduced the sales increase reported in the annualized published figures……that same pdf indicates that the median home selling price for all housing types fell 0.6%, from a revised $256,900 in September to $255,400 in October, while the average home sales price was $294,200, down 0.6% from the $296,000 average sales price in September, but up 2.3% from the $287,600 average home sales price of October a year ago…regionally, average home sales prices ranged from a low of $226,300 in the Midwest to a high of $403,900 in the West, with all regions showing a decrease in the average sales price for the month…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 Increased to 5.22 million in October and Comments on October 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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tables and graphs for November 24

rig count summary:

November 21 2018 rig count summary

weekly change in natural gas inventories:

November 21 2018 change in nat gas inventories thru Nov 16

daily average temperatures:

November 24 2018 daily average temps thru Nov 22nd

heating demand:

November 23 2018 population weighted heating demand

deviation in heating demand:

November 23 2018 heating demand deviation from normal

oil prices:

November 24 2018 weekly oil prices

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natural gas prices hit 4 year high, pre-winter supplies at a 15 year low; oil supplies rise most in 21 months; OPEC report, DUC wells, et al

oil prices fell for the 6th week in a row, extending their record losing streak to twelve days before recovering a small fraction of their earlier losses…after falling 4.7% to $60.19 a barrel on the US waiver of Iran sanctions last week, prices of US oil contracts for December delivery opened more than 50 cents higher on Monday morning and rose to as high as $61.28 a barrel after Saudi Arabia announced a December production cut of a million barrels a day, but then gave up those early gains after Trump warned he hopes OPEC doesn’t cut crude production because oil prices should be much lower, with prices then falling below $60 a barrel for the first time since February before steadying to close at $59.93 a barrel, a loss of 23 cents on the day and down a record 11 sessions in a row…oil prices then tumbled to one year lows in high trading volume on Tuesday as oil traders capitulated and sold their positions en masse, with oil prices ending down $4.24 or 7% at $55.69 a barrel in the largest one-day percentage decline for the contract since September 2015….oil prices finally rebounded on Wednesday, rising as much as 3% as OPEC leaders discussed a supply cut, before settling back to end with a 56 cent increase at $56.25 a barrel, after the API reported the largest increase in US crude supplies since Februaryoil prices managed another increase on Thursday despite a jump in US crude stockpiles and production, closing up 21 cents at $56.46 a barrel…oil prices then staged another 3% rally on Friday morning, rising as high as $57.96 a barrel on a Saudi push for a deep oil output cut, before settling back to close at $56.46 a barrel, unchanged on the day…however, after the big Tuesday selloff, oil prices still ended down 6.2% for the week, and are now down more than 26% from the 4-year high of $76.41 a barrel that they hit on October 3rd, just a little over 6 weeks earlier…

as volatile as oil prices were this week, the swings in the front month contract for natural gas almost defy explanation…natural gas contract prices for December delivery spiked 23.5 cents on a colder European weather model early Monday before pulling back anbd ending the day 6.9 cents higher at $3.788 per mmBTU, then were up limit to $4.101 per mmBTU on Tuesday on bullish weather risks and continued fear about low storage levels, before jumping nearly 20% to $4.929 per mmBTU on an even colder forecast early Wednesday in the largest price move since February 2003 and ending at $4.837 per mmBTU, the highest closing price in more than four years…however, after some warmer weather model guidance on Thursday, natural gas prices gave back all of their Wednesday gains and then some, tumbling nearly $1 to as low as $3.882 per mmBTU before recovering to close at $4.038 per mmBTU….a forecast for a cold early December sent natural gas prices flying again to as high as $4.390 per mmBTU on Friday, before settling at $4.272 per mmBTU at the close, for a net increase of 14.9% on the week…

the natural gas storage report for the week ending November 9th from the EIA showed that natural gas in storage in the US rose by 39 billion cubic feet to 3,247 billion cubic feet during that week, which left our gas supplies 528 billion cubic feet, or 14.0% below the 3,775 billion cubic feet that were in storage after a 13 billion cubic feet withdrawal on November 10th of last year, and 601 billion cubic feet, or 15.6% below the five-year average of 3,848 billion cubic feet of natural gas that are typically in storage on the second weekend of November….this week’s 39 billion cubic feet increase in natural gas supplies was somewhat more than the low- to mid-30s billion cubic feet increase in stocks that was projected by major surveys, and was much above the average of 19 billion cubic feet of natural gas that have been added to storage during the first full week of November in recent years, the 7th average or above average inventory increase over the past nineteen weeks…natural gas storage facilities in the Midwest saw an 11 billion cubic feet increase over the week, which reduced the region’s supply deficit to 9.3% below normal, and natural gas supplies in the East increased by 4 billion cubic feet and their supply deficit fell to 9.2% below normal for this time of year…meanwhile, the South Central region saw a 30 billion cubic feet increase in their supplies, as their natural gas storage deficit decreased to 22.6% below their five-year average for the second weekend of November…on the other hand, only 1 billion cubic feet were added to supplies in the Pacific region, but their deficit from normal still fell to 24.2%, while 1 billion cubic feet were withdrawn from storage in the Mountain region, where their natural gas supply deficit rose to 17.4% below normal for this time of year…. 

the natural gas in storage as of this reporting week ending November 9th will most certainly be the high for the year, because as most of you know, the past week has seen an outbreak of winter-like cold temperatures across most of the US…this year’s peak at 3,247 billion cubic feet thus compares to the lowest pre-winter peak in the past 5 years of 3611 billion cubic feet on November 7th of 2014, the 10 year low pre-winter peak of 3,488 that was hit on November 14th of 2008, and the early decade low pre-winter peaks of 3,282 billion cubic feet on November 11th of 2005, and the 3,187 billion cubic feet on that were in storage to start the winter on November 7th of 2003….to get an idea of what kind of temperature factors will be influ​​encing next week’s natural gas supply report, we’ll take a quick look at the most recent average temperature summary from the EIA’s natural gas storage dashboard

November 16 2018 daily average temps thru Nov 15th

the above graphic from the EIA’s natural gas storage dashboard gives us both the average daily temperature from November 2nd thru November 15th in each of the five natural gas regions, as well as a color-coded variance from normal for each of those daily temperature averages, with shades of brown indicating the average temperatures in the region were above normal on a given date, while shades of blue indicate average temperatures that were below normal for the date, as indicated in the legend at the bottom….thus this graphic gives us not only the actual average temperature for each region for each day, but also indicates how much that temperature deviated from the norm…we can see that average temperatures began to shift from above normal to below normal on November 7th for the Mountain and Midwest states, and by November 9th that cold weather outbreak had spread to the East Coast and South Central regions, with the latter experiencing an average 20 degree temperature drop in just a matter of days…

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, ​referencing the week ending November 9th, indicated a moderate decrease in our crude oil exports while most other crude supply and demand metrics were relatively little changed, and hence there was an even larger addition to our commercial crude supplies ​than the prior week, the 8th increase in a row…our imports of crude oil fell by an average of 87,000 barrels per day to an average of 7,452,000 barrels per day, after rising by an average of 195,000 barrels per day the prior week, while our exports of crude oil fell by an average of 355,000 barrels per day to an average of 2,050,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 5,402,000 barrels of per day during the week ending November 9th, 268,000 more barrels per day than the net of our imports minus exports during the prior week…over the same period, field production of crude oil from US wells was reportedly 100,000 barrels per day higher at 11,700,000 barrels per day, which means that our daily supply of oil from the net of our trade in oil and from wells totaled an average of 17,102,000 barrels per day during this reporting week… 

meanwhile, US oil refineries were using 16,432,000 barrels of crude per day during the week ending November 9th, 24,000 barrels per day more than the amount of oil they used during the prior week, while over the same period a net of 1,271,000 barrels of oil per day were reportedly being added to the oil that’s in storage in the US….hence, this week’s crude oil figures from the EIA would seem to indicate that our total working supply of oil from net imports and from oilfield production was 601,000 barrels per day short of what refineries reported they used during the week plus what oil was added to storage….to account for that disparity between the supply of oil and the consumption or new storage of it, the EIA inserted a (+601,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the reported data for the daily supply of oil and the consumption of it balance out, essentially a fudge factor that is labeled in their footnotes as “unaccounted for crude oil”…again, with an “unaccounted for crude” figure that large, one or more of this week’s oil metrics must still be off by a statistically significant amount, most likely oil production, since it has historically been the least dependable of the​se reported​ metrics (for more on how this weekly oil data is gathered, and the possible reasons for that “unaccounted for” oil, see this EIA explainer)….that “unaccounted for crude” figure strongly suggests that US crude oil output has already topped 12 million barrels per day…

further details from the weekly Petroleum Status Report (pdf) indicate that the 4 week average of our oil imports fell to an average of 7,503,000 barrels per day, now 3.1% less than the 7,742,000 barrel per day average that we were importing over the same four-week period last year….the net 1,271,000 barrel per day increase in our total crude inventories included a 1,467,000 barrel per day increase in our commercially available stocks of crude oil, which was partly offset by a 196,000 barrel per day decrease in the amount of oil in our Strategic Petroleum Reserve, likely part of a sale of 11 million barrels from those reserves to Exxon et al that closed two months ago….this week’s crude oil production was reported up by 100,000 barrels per day to 11,700,000 barrels on a rounded 100,000 barrels per day increase to 11,200,000 barrels per day output from wells in the lower 48 states, while an 11,000 barrel per day increase to 499,000 barrels per day in oil output from Alaska gave us the re-rounded national total of 11,700,000 barrel per day…last year’s US crude oil production for the week ending November 10th was at 9,645,000 barrels per day, so this week’s rounded oil production figure was 21.3% above that of a year ago, and 38.8% more than the interim low of 8,428,000 barrels per day that US oil production fell to during the last week of June of 2016…  

US oil refineries were operating at 90.1% of their capacity in using 16,432,000 barrels of crude per day during the week ending November 9th, up from 90.0% of capacity the prior week, a fairly normal utilization rate for the middle of November….the 16,432,000 barrels per day of oil that were refined this week were 1.2% lower than the 16,639,000 barrels of crude per day that were processed during the week ending November 10th, 2017, when US refineries were operating at 91.0% of capacity…

while the amount of oil being refined was little changed this week, gasoline output from our refineries was quite a bit higher, increasing by 342,000 barrels per day to 10,056,000 barrels per day during the week ending November 9th, after our refineries’ gasoline output had decreased by 650,000 barrels per day during the week ending November 2nd…as a result of that rebound in our gasoline output, our gasoline production during the week was 2.1% higher than the 9,852,000 barrels of gasoline that were being produced daily during the same week last year….meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) increased by 30,000 barrels per day to 4,993,000 barrels per day, after that output had decreased by 20,000 barrels per day the prior week….however, the week’s distillates production was still 4.5% lower than the 5,231,000 barrels of distillates per day that were being produced during the week ending November 10th 2017…. 

however, even with that big increase in our gasoline production, our supply of gasoline in storage at the end of the week still fell by 1,411,000 barrels to 226,610,000 barrels by November 9th, the 22nd decrease in the past 38 weeks, after our gasoline supplies had fallen by 8,151,000 barrels during the 4 ​full ​weeks of October….our gasoline supplies fell despite higher production because our imports of gasoline fell by 338,000 barrels per day to a 13 month low of 253,000 barrels per day, while our exports of gasoline rose by 46,000 barrels per day to 740,000 barrels per day, and because the amount of gasoline supplied to US markets rose by 93,000 barrels per day to 9,192,000 barrels per day…but even after falling most of the fall, our gasoline inventories are still at a seasonal high, 7.7% higher than last November 10th’s level of 210,431,000 barrels, and roughly 8% above the 10 year average of our gasoline supplies for this time of the year

meanwhile, with our distillates production little changed, our supplies of distillate fuels fell for the 8th week in a row, decreasing by 3,589,000 barrels to 119,268,000 barrels during the week ending November 9th, after our distillates supplies had fallen by 7,517,000 barrels over the prior two weeks…our distillates supplies fell again because the amount of distillates supplied to US markets, a proxy for our domestic demand, increased by 315,000 barrels per day to 4,633,000 barrels per day, even as our exports of distillates fell by 128,000 barrels per day to 1,178,000 barrels per day, and as our imports of distillates rose by 139,000 barrels per day to 305,000 barrels per day….after this week’s decrease, our distillate supplies ended the week 4.4% below the 124,763,000 barrels that we had stored on November 10th, 2017, and were nearly 10% below the 10 year average of distillates stocks for this time of the year…     

finally, with higher oil production and somewhat lower oil exports, our commercial supplies of crude oil increased for the 8th week in a row and for the 24th time in 2018, rising by 10,270,000 barrels during the week, from 431,787,000 barrels on November 2nd to 442,057,000 barrels on November 9th, the largest weekly increase since the week ending February 3rd 2017…that increase means that our crude oil inventories are now roughly 5% above the five-year average of crude oil supplies for this time of year, and roughly 27% above the 10 year average of crude oil stocks for the second weekend in November, with the disparity between those figures arising because it wasn’t until early 2015 that our oil inventories first rose above 400 million barrels…however, since our crude oil inventories had been falling through most of the past year and a half until just recently, our oil supplies as of November 9th were still 3.7% below the 458,997,000 barrels of oil we had stored on November 10th of 2017, 9.8% below the 490,284,000 barrels of oil that we had in storage on November 11th of 2016, and 2.8% below the 455,074,000 barrels of oil we had in storage on November 13th of 2015…   

OPEC’s Monthly Oil Market Report

next we’ll review OPEC’s November Oil Market Report (covering October OPEC & global oil data), which was released on Tuesday of this past week, and​ which​ is available as a free download, and hence it’s the report we check for monthly global oil supply and demand data…the first table from this monthly report that we’ll look at is from the page numbered 59 of that report (pdf page 69), and it shows oil production in thousands of barrels per day for each of the current OPEC members over the recent years, quarters and months, as the column headings indicate…for all their official production measurements, OPEC uses an average of estimates from six “secondary sources”, namely the International Energy Agency (IEA), the oil-pricing agencies Platts and Argus, ‎the U.S. Energy Information Administration (EIA), the oil consultancy Cambridge Energy Research Associates (CERA) and the industry newsletter Petroleum Intelligence Weekly, as an impartial adjudicator as to whether their output quotas and production cuts are being met, to thus resolve any potential disputes that could arise if each member reported their own figures…

October 2018 OPEC crude output via secondary sources

as we can see on this table of official oil production data, OPEC’s oil output increased by 127,000 barrels per day to 32,900,000 barrels per day in October, from their September production total of 32,773,000 barrels per day….however, that September figure was originally reported as 32,761,000 barrels per day, so OPEC’s September output was therefore revised 12,000 barrels per day higher with this report (for your reference, here is the table of the official September OPEC output figures as reported a month ago, before this month’s revisions)…as you can tell from the far right column above, increases of 142,000 barrels per day in the oil output from the United Arab Emirates, 127,000 barrels per day in the oil output from Saudi Arabia and 60,000 barrels per day in the oil output from Libya were the major reasons for this month’s increase, more than offsetting the decrease of 156,000 barrels per day in Iranian output…however, excluding new member Congo, the September output of 32,576,000 barrels per day from the other OPEC members was still 164,000 barrels per day below the 32,730,000 barrels per day revised quota they agreed to at their November 2017 meeting, mostly due to the big drop in Venezuelan output, another OPEC country that has also been impacted by US sanctions…  

the next graphic we’ll look at shows us both OPEC and global monthly oil production on the same graph​​, over the period from November 2016 to October 2018, and it’s taken from the page numbered 60 (pdf page 70) of the November OPEC Monthly Oil Market Report…on this graph, the cerulean blue bars represent OPEC oil production in millions of barrels per day as shown on the left scale, while the purple graph represents global oil production in millions of barrels per day, with the millions of barrels per day of global output shown on the right scale…      

October 2018 OPEC report global oil supply

OPEC’s preliminary estimate indicates that total global oil production rose by 440,000 barrels per day to a record high 99.76 million barrels per day in October, after September’s total global output figure was revised up by 3​2​0,000 barrels per day from the 90.0 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by ​a rounded ​310,000 barrels per day in October after that revision, with increased US and Canadian output the major contributors to the non-OPEC increase….global oil output during October was also 3.05 million barrels per day, or 3.2% higher than the 96.71 million barrels of oil per day that were reportedly being produced globally in October a year ago (see the November 2017 OPEC report online (pdf) for the originally reported year ago details)…with the October increase in OPEC’s output following the upward revision to their September output, their October oil production of 32,900,000 barrels per day represented 33.0% of what was produced globally during the month, same as their global share in September, which had originally been reported as a 33.1% share….OPEC’s October 2017 production was reported at 32,589,000 barrels per day, which means that the 14 OPEC members who were part of OPEC last year, excluding new member Congo, are producing 13,000 fewer barrels per day of oil than they were producing a year ago, during the tenth month that their production quotas were in effect, with a 692,000 barrel per day decrease in output from Venezuela and a 527,000 barrel per day decrease in output from Iran from that time more than offsetting the production increases from the Saudis, the Emirates, Iraq and Libya…  

despite the 440,000 barrel per day increase in global oil output in October, increasing demand meant that we again saw a deficit in the amount of oil being produced globally during the month, as this next table from the OPEC report will show us…  

October 2018 OPEC report global oil demand

the table above comes from page 32 of the November OPEC Monthly Oil Market Report (pdf page 42), and it shows regional and total oil demand in millions of barrels per day for 2017 in the first column, and OPEC’s estimate of oil demand by region and globally quarterly over 2018 over the rest of the table…on the “Total world” line ​in the fifth column, we’ve circled in blue the figure that’s relevant for October, which is their revised estimate of global oil demand during the fourth quarter of 2018…       

OPEC’s estimate is that during the 4th quarter of this year, all oil consuming regions of the globe will be using 99.98 million barrels of oil per day, which was a downward revision by a 0.10 million barrels of oil per day from their prior oil consumption estimate for the quarter (see demand revisions circled in green above)….meanwhile, as OPEC showed us in the oil supply section of this report and the summary supply graph above, the world’s oil producers were producing 99.76 million barrels per day during October, which means that there was a still a shortfall of around 220,000 barrels per day in global oil production vis-a vis the demand estimated for the month…    

meanwhile, a month ago we estimated a global shortfall of around 350,000 barrels per day in global oil production during September, based on figures published at that time…however, as we saw earlier, September’s global output figure was revised up by 3​20,000 barrels per day from those figures…in addition, as we’ve circled in the green ellipse above, oil demand for the 3rd quarter was revised 3,000 barrels per day lower, so with those two revisions September’s global output would have thus​ virtually matched demand​…that 30,000 barrels per day revision to third quarter demand also means that the global shortfall of 580,000 barrels per day that we had figured for August last month would thus be revised to 550,000 barrels per day, and that the 960,000 barrels per day shortfall we had figured for July would thus be reduced to 930,000 barrels per day….

in addition, last month we estimated there was a shortfall of around 50,000 barrels per day in global oil production vis-a vis the demand in June, a shortfall for May of 490,000 barrels per day, and a shortfall in April of 300,000 barrels per day… but as we see in the green ellipse above, oil demand for the 2nd quarter has been revised 120,000 barrels per day higher, so our revised global oil shortfalls for the 2nd quarter months will thus now be 170,000 barrels per day for June, 610,000 barrels per day for May, and 400,000 barrels per day for April…

since there was no revision to demand in the first quarter, our surplus figures of 20,000 barrels per day for March, 200,000 barrels per day for February, and 40,000 barrels per day for January remain as we figured them a month ago…so by totaling up these 10 monthly revised estimates of surplus or shortfall, we find that for the first ten months of 2018, global oil demand exceeded production by roughly 81,250,000 barrels, actually a comparatively small net oil shortfall that is the equivalent of roughly 19.5 hours of global oil production at the October production rate

This Week’s Rig Count

US drilling rig activity increased for the sixth time in 8 weeks during the week ending November 16th, albeit not by much, but enough to push the rig count to a new 44 month high….Baker Hughes reported that the total count of rotary rigs running in the US increased by 1 rig to 1082 rigs over the week ending on Friday, which was also 167 more rigs than the 915 rigs that were in use as of the November 17th report of 2017, but down from the shale era high of 1929 drilling rigs that were deployed on November 21st of 2014, the week before OPEC began their attempt to flood the global oil market…  

the count of rigs drilling for oil increased by 2 rigs to 888 rigs this week, which was 150 more oil rigs than were running a year ago, while it remained well below the recent high of 1609 rigs that were drilling for oil on October 10, 2014…at the same time, the number of drilling rigs targeting natural gas formations decreased by 1 to 194 rigs, which was still 17 more than the 177 natural gas rigs that were drilling a year ago, but way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008…

offshore drilling in the Gulf of Mexico increased by 1 rig to 22 rigs this week, which was also 1 more rig than the 21 Gulf of Mexico rigs active a year ago…with no other offshore US drilling being done elsewhere either this week or a year ago, those Gulf of Mexico totals are also equal to the national offshore rig count…. meanwhile, one of the platforms which had been drilling through inland waters in Louisiana was shut down this week, leaving two rigs active on inland waters, ​still ​up from the 1 inland water rig running a year ago

the count of active horizontal drilling rigs increased by 4 rigs to 939 horizontal rigs this week, which was also 163 more horizontal rigs than the 776 horizontal rigs that were in use in the US on November 17th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…on the other hand, the directional rig count decreased by 3 to 71 directional rigs this week, which was also down from the 76 directional rigs that were in use during the same week of last year….meanwhile, the vertical rig count was unchanged at 72 vertical rigs this week, which was still up from the 63 vertical rigs that were operating on November 17th of 2017…  

the details on this week’s changes in drilling activity by state and by shale basin are included in our screenshot below of that part of the rig count summary pdf from Baker Hughes that shows those changes…the first table below shows weekly and year over year rig count changes for the major producing states, and the second table shows the weekly and year over year rig count changes for the major US geological oil and gas basins…in both tables, the first column shows the active rig count as of November 16th, the second column shows the change in the number of working rigs between last week’s count (November 9th) and this week’s (November 16th) count, the third column shows last week’s November 9th active rig count, the 4th column shows the change between the number of rigs running on Friday and those running on the equivalent weekend of a year ago, and the 5th column shows the number of rigs that were drilling at the end of that reporting week a year ago, which in this week’s case was on Friday the 17th of November, 2017…      

November 16 2018 rig count summary

the 3 rig increase in the Eagle Ford of south Texas indicated above included 2 rigs drilling for oil and one targeting natural gas, bringing the Eagle Ford deployment up to 70 oil rigs and 9 targeting gas; the rig that was shut down in the Dallas area Barnett shale had been targeting oil; a natural gas rig still remains active there…while there were 2 natural gas rigs added in the Pennsylvania Marcellus, two natural gas rigs were shut down in the Utica, one each in Pennsylvania and Ohio​; as a result, ​the Utica shale rig count is now at a 2 year low…the natural gas rig count was still down by one, however, because 2 gas rigs were idled in formations not tracked separately by Baker Hughes…note that in addition to the rig changes in the major producing states shown above, Illinois also saw a rig start up this week, the first drilling activity in that state since February 23rd of this year; a year ago, there was also one rig active in Illinois..

DUC well report for October

Wednesday of this past week saw the release of the EIA’s Drilling Productivity Report for November, which includes the EIA’s October data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions…for the 25th consecutive month, this report again showed an increase in uncompleted wells nationally in ​October, as both drilling of new wells and completions of drilled wells increased, but the new drilling increased at a faster pace….like most previous months, this month’s uncompleted well increase was mostly due to a big increase of newly drilled but uncompleted wells (DUCs) in the Permian basin of west Texas, with increases of uncompleted wells in the Anadarko basin of Oklahoma and the Eagle Ford of south Texas also contributing…for all 7 sedimentary regions covered by this report, the total count of DUC wells increased by 269, from 8,276 wells in September to 8,545 wells in October, again the highest number of such unfracked wells in the history of this report, and up 32.5% from the 6,329 wells that had been drilled but remained uncompleted in October a year ago…that was as 1,577 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during October, up from the 1,547 drilled in September, while 1,308 wells were completed and brought into production by fracking, a increase of 23 well completions over the 1285 completions seen in September…at the October completion rate, the 8,545 drilled but uncompleted wells left at the end of the month again represent a 6.5 month backlog of wells that have been drilled but not yet fracked…

as has been the case for most of the past two years, the October DUC well increases were predominantly oil wells, with most of those in the Permian basin…the Permian basin saw its total count of uncompleted wells rise by 249, from 3,617 DUC wells in September to 3,866 DUCs in October, as 684 new wells were drilled into the Permian​,​ but only 435 wells in the region were fracked…at the same time, DUC wells in the Anadarko basin region in & around Oklahoma rose by 41, from 1,043 DUC wells in September to 1,084 DUCs in October, as 206 wells were drilled in the Anadarko basin during October, while 165 Anadarko basin wells were completed…over the same period, the number of DUC wells in the Eagle Ford of south Texas increased by 25 to 1,546, as 210 wells were drilled into the Eagle Ford while 185 Eagle Ford wells were fracked….in addition, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory increase by 7 wells to 203, as 60 wells were drilled into the Haynesville during October, while 53 Haynesville wells were fracked during the same period…

on the other hand, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 19 wells, from 642 DUCs in September to 623 DUCs in October, as 119 wells were drilled into the Marcellus and Utica shales, while 138 of the already drilled wells in the region were fracked…in addition, the drilled but uncompleted well count in the Niobrara chalk of the Rockies’ front range decreased by 14 wells to 401, as 178 Niobrara wells were drilled while 192 Niobrara wells were being fracked…lastly, DUC wells in the Bakken of North Dakota fell by 20, from 817 DUC wells in September to 797 DUCs in October, as 120 wells were drilled into the Bakken in October, while 140 of the drilled wells in that basin were completed….thus, for the month of October, DUCs in the 5 oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by a net of 281 wells to 7719 wells, while the uncompleted well count in the natural gas basins (the Marcellus, Utica, and the Haynesville) decreased by 12 wells to 826 wells, although as the report notes, once into production, more than half the wells drilled nationally will produce both oil and gas… 

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October’s consumer prices, retail sales, industrial production; September’s business inventories..

Major reports released this week included Retail Sales Report for October and the Business Sales and Inventories Report for September from the Census Bureau, the October Consumer Price Index and the October Import-Export Price Index from the Bureau of Labor Statistics, and the October report on Industrial Production and Capacity Utilization from the Fed…in addition, the BLS also released the Regional and State Employment and Unemployment for October on Friday, which breaks down the establishment survey and household survey data from the monthly jobs report released two weeks ago by region and by state…

This week also saw the release of three regional Fed manufacturing surveys for November: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, a suburban NYC county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from +21.1 in October to +23.3 in November, suggesting stronger growth of First District manufacturing; the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions moved lower, from a reading of +22.2 in October to +12.9 in November, suggesting a somewhat slower expansion of that the region’s manufacturing, while the Kansas City Fed manufacturing survey, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to +15 in November, up from +8 in October and +13 in September, suggesting an ongoing expansion in that region’s manufacturing for the twenty-fourth month in a row…

October CPI up 0.3% on Higher Fuel, Electricity, Used Car Costs

The consumer price index increased by 0.3% in October, as higher prices for gasoline, electricity, and used vehicles were only partially offset by lower food prices…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.3% in October after it had risen 0.1% in September, 0.2% in August, 0.2% in July, 0.1% in June, 0.2% in May, 0.2% in April but after falling 0.1% in March after it had risen by 0.2% in February, 0.5% in January, 0.1% in December, 0.4% in November, and by 0.1% last  October…the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 252.439 in September to 252.885 in October, which left it statistically 2.522% higher than the 246.663 index reading in October of last year, which is reported as a 2.5% increase….with higher prices for energy driving the CPI increase, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, with the unadjusted core price index rising from 258.429 to 259.063, which left the core index 2.139% ahead of its year ago reading of 253.638, which is reported as a 2.1% year over year increase, down from the 2.2% annual increase reported a month ago..

The volatile seasonally adjusted energy price index rose by 2.4% in October, after falling by 0.5% in September, rising by 1.9% in August, falling by 0.3% in July and by 0.3% in June, rising by 0.9% in May and by 1.4% in April, falling by 2.8% in March, rising by 0.1% in February and by 3.0% in January, and hence is now 8.9% higher than in October a year ago…prices for energy commodities were 2.9% higher in October, while the index for energy services rose by 1.7%, after falling by 0.8% in September…the energy commodity index was higher due to a 3.0% increase in price of gasoline, the largest component, and a 3.7% increase in the index for fuel oils, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 0.8% lower…within energy services, the index for utility gas service fell by 0.6% after falling by 1.7% in September and is now 2.1% lower than it was a year ago, while the electricity price index was up 2.3%, after it was down 0.5% in September….energy commodities are now 16.3% higher than their year ago levels, with gasoline prices averaging 16.1% higher than they were a year ago, while the energy services price index is now 0.1% higher than last October, as electricity prices have now increased by 0.7% over that period…

The seasonally adjusted food price index was 0.1% lower in October, after being unchanged in September, rising 0.1% in August, 0.1% in July, 0.2% in June, being unchanged in May, rising 0.3% in April, 0.1% in March, being unchanged in February, rising 0.2% in January, 0.2% in December, being unchanged in October and November, and rising 0.1% last September, as the index for food purchased for use at home fell 0.2% in October, while prices for food bought to eat away from home was 0.1% higher, as prices at fast food outlets fell 0.1%, prices at full service restaurants rose 0.2%, and food prices at employee sites and schools rose 1.0%…

In the food at home categories, the price index for cereals and bakery products was 0.6 lower even though bread prices rose 0.4%, because prices for flour and prepared flour mixes fell 2.7% and the index for rice, pasta, and cornmeal prices fell 2.8%…meanwhile, the price index for the meats, poultry, fish, and eggs group was unchanged, as the fish and seafood price index rose 1.4% while prices for beef roasts fell 3.8% and ham prices were 1.8% lower….at the same time, the index for dairy products was 0.4% lower, mostly on a 1.1% decrease in the index for cheese and related products…in addition, the fruits and vegetables index was 0.7% lower on a 1.8% decrease in the price index for fresh fruits and a 1.0% decrease in the price index for canned fruits and vegetables….on the other hand, the beverages index was 0.2% higher, as frozen noncarbonated juices and drink prices were priced 1.1% higher and instant coffee prices rose 1.5%…lastly, the index for the ‘other foods at home’ category was unchanged, as the index for sugar and sweets fell 0.7% while prices for soups rose 1.4%….the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2 for this release, which gives us a line item breakdown for prices of more than 200 CPI items overall…since last October, none of the ‘food at home’ line items have seen prices change by more than 10% over the past year…

Among the seasonally adjusted core components of the CPI, which rose by 0.2% in October after rising by 0.1% in September, by 0.1% in August, 0.2% in July, 0.2% in June, 0.2% in May, 0.1% in April, 0.1% in March, 0.2% in February, 0.3% in January, 0.3% in December, 0.1% in November, 0.2% in October, 0.1% in September, 0.2% in August and by 0.1% in each of the prior 4 months, the composite of all goods less food and energy goods was 0.3% higher, while the more heavily weighted composite for all services less energy services was 0.2% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust October retail sales for inflation in national accounts data, the index for household furnishings and supplies increased by 0.4%, as the index for appliances rose 1.6% and the index for window and floor coverings was 2.2% higher…at the same time, the apparel price index was 0.1% higher, as the index for men’s suits, sport coats, and outerwear rose 3.9% and the index for girl’s apparel was 1.1% higher, while prices for women’s outerwear fell 6.4%…in addition, prices for transportation commodities other than fuel were up 0.8%, as prices for used cars and trucks rose 2.6% while new vehicle prices fell 0.2%…on the other hand, prices for medical care commodities were 0.1% lower as prescription drugs prices fell 0.6%, while the recreational commodities index fell 0.5% on 1.2% lower prices for televisions and 1.7% lower prices for sports vehicles including bicycles…in addition, the education and communication commodities index was 1.5% lower on a 1.6% decrease in the index for personal computers and peripheral equipment and a 2.5% drop in the index for telephone hardware, calculators, and other consumer information items…lastly, a separate price index for alcoholic beverages was 0.1% higher, while the price index for ‘other goods’ fell 0.3% on a 5.6% decrease in the price index for miscellaneous personal goods…

Within core services, the price index for shelter rose 0.2% on a 0.2% increase in rents and a 0.3% increase in homeowner’s equivalent rent, while prices for lodging away from home at hotels and motels fell 2.4%, and the sub-index for water, sewers and trash collection rose 0.3%, and other household operation costs were on average unchanged….the price index for medical care services was also up by 0.2%, as dental services rose 0.3%, nursing homes and adult day rose 0.5%, and health insurance rose 1.1%…meanwhile, the transportation services index was up by 0.1% as car and truck rentals rose 3.3% while intercity bus fares fell 2.0%…at the same time, the recreation services index was unchanged as video discs and other media services rose 5.5% while photo processing fell 1.4%….in addition, the index for education and communication services was also unchanged as the price index for college tuition and fees rose 0.6% while prices for land-line telephone services fell 1.1%…lastly, the index for other personal services was up 0.5% as haircuts rose 0.6% and the index for tax return preparation and other accounting fees rose 0.7%…among core line items, prices for televisions, which are now 17.8% cheaper than a year ago, the price index for audio equipment, which has fallen 11.9% over the past year, the price index for toys, which is down by 10.9% since last October, and the price index for miscellaneous personal goods, which has now decreased 10.0% year over year, have all seen prices fall by more than 10% over the past year, while no line item has seen prices rise by a double digit magnitude over that span…

Retail Sales Rise 0.8% in October after Prior Months Sales Revised Lower

Seasonally adjusted retail sales increased in October after retail sales for August and September were revised lower…the Advance Retail Sales Report for October (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $511.5 billion during the month, which was 0.8 percent (±0.5%) higher than September’s revised sales of $507.6 billion and 4.6 percent (±0.5%) above the adjusted sales in October of last year…September’s seasonally adjusted sales were revised from the $509.0 billion reported last month to $507.6 billion, while August’s sales were revised from $508.5 billion to $507.87 billion, and hence the August to September percent change was revised from +0.1% (±0.5 percent)* to -0.1% (±0.2 percent)*….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 4.7%, from $482,985 million in September to $505,604 million in October, while they were up 5.9% from the $477,592 million of sales in October a year ago…the total $2.03 billion downward revision to August and September’s retail sales should reduce the previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.15 percentage points, assuming the distribution of price adjustments in the revised figures is similar to that of those originally published…

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the October Census Marts pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each kind of business from the September revised figure to this month’s October “advance” report in the first sub-column, and then the year over year percentage sales change since last October in the 2nd column…the second double column pair below gives us the revision of the September advance estimates (now called “preliminary”) as of this report, with the new August to September percentage change under “Aug 2018 r” (revised) and the September 2017 to September 2018 percentage change as revised in the last column shown…for your reference, the table of last month’s advance estimate of September sales, before this month’s revisions, is here.…

October 2018 retail sales table

To compute October’s real personal consumption of goods data for national accounts from this October retail sales report, the BEA will use the corresponding price changes from the October 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 October retail sales excluding the 3.5% price-related increase in sales at gas station were only up by 0.5%…since the CPI report showed that the composite price index for all goods less food and energy goods was up 0.2% in October, we can thus approximate that real retail sales excluding food and energy will on average be 0.2% lower than the core retail sales shown above, or show an increase of roughly 0.3%…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 nominal sales at motor vehicle & parts dealers were up 1.1%, the price index for for transportation commodities other than fuel were up 0.8%, which would mean that real unit sales at auto & parts dealers was actually only the order of 0.3% higher… similarly, while sales at clothing stores were 0.5% higher in October, the apparel price index was 0.1% higher, which means that real sales of clothing rose around 0.4%.…on the other hand, while nominal sales at sporting goods, hobby, music and book stores rose 0.5%, the price index for recreational commodities fell 0.5%, so real sales of recreational goods were up on the order of 1.0%…

In addition to figuring those core retail sales, we should adjust food and energy retail sales for price changes separately…the CPI report showed that the food price index was 0.1% lower in October, with the index for food purchased for use at home 0.2% lower in October, while prices for food bought to eat away from home were 0.1% higher… hence, with nominal sales at food and beverage stores 0.3% higher, real sales of food and beverages would be roughly 0.5% higher in light of the 0.2% lower prices…on the other hand, the 0.2% decrease in nominal sales at bars and restaurants, once adjusted for 0.1% higher prices, suggests that real sales at bars and restaurants fell 0.3%…meanwhile, while sales at gas stations were up 3.5%, there was a 3.0% increase in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 0.5%, with the caveat that gasoline stations do sell more than gasoline… averaging real sales computed thusly together, we’d estimate that the income and outlays report for August will show that real personal consumption of goods rose around 0.3% in October, after rising by a revised 0.2% in September…that October increase will account for almost 8% of 4th quarter GDP…

Industrial Production Up 0.1% in October, after Prior Months Revised much higher

The Fed’s G17 release on Industrial production and Capacity Utilization reported that industrial production increased by 0.1% in October after rising by a revised 0.2% in September and by a revised 0.8% in August, as “hurricanes lowered the level of industrial production in both September and October, but their effects appear to be less than 0.1 percent per month.“….the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 109.1 in October from 109.0 in September, which was revised from the 108.5 index level reported last month…at the same time, the August index was revised from 108.2 to 108.8, primarily as a result of a large upward revision to mining output, and the July index was revised from 107.8 to 107.9….as a result of those revisions, industrial production is now 4.1% higher than a year ago, while third quarter output is now reported to have increased at an annual rate of 4.7 percent, appreciably above the 3.3% annualized increase reported initially….

The manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.3%, from 105.1 in September to 105.4 in October, after September’s manufacturing index was revised up from 104.8 to 105.1, August’s index was revised up from 104.6 to 104.8, and July’s index was revised up from 104.3 to 104.4….on the other hand, the mining index, which includes oil and gas well drilling, fell by 0.3%, from 126.7 in September to 126.3 in October, after the September mining index was revised up from 124.8, and the August index was revised from 124.3 to 126.9, leaving the mining index 13.1% higher than it was a year ago….meanwhile, the utility index, which often fluctuates due to above or below normal temperatures, fell 0.5% in October, from an unrevised 105.2 to 104.7, after August utility index was revised up from 105.2 to 105.4, leaving the utility index 1.7% higher 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 industry fell to 78.4% in October from 78.5% in September, which was revised from the 78.1% utilization reported in last month’s report …capacity utilization of NAICS durable goods production facilities rose from 76.4% in September to 76.6% in October, after September’s figure was revised up from 76.3%, while capacity utilization for non-durables producers rose from 77.2% in September to 77.3% in October, after September’s nondurables utilization was revised up from 77.0%…capacity utilization for the mining sector fell to 92.7% in October from 93.5% in September, which was originally reported as 92.2%, while utilities were operating at 77.3% of capacity during October, down from their 77.8% of capacity during September, which was revised from the previously reported 77.7%…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…. 

Business Sales Up 0.4% in September, Business Inventories Up 0.3%

After the release of the October retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for September (pdf), which incorporates the revised September retail data from that October report and the earlier published September wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,468.0 billion in September, up 0.4 percent (±0.2 percent) from August’s revised sales, and up 6.6 percent (±1.3 percent) from September sales of a year earlier…note that total August sales were concurrently revised up from the originally reported $1,461.9 billion to $1,462.0 billion….manufacturer’s sales were up 0.9% to $509,779 million in September, and retail trade sales, which exclude restaurant & bar sales from the revised September retail sales that we reported earlier, rose 0.2% to $447,088 million, while wholesale sales rose 0.2% to $511,169 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,888.7 billion at the end of September, up 0.3% (±0.1%) from August, and 4.4  percent (±1.3 percent) higher than in September a year earlier…the value of end of August inventories were revised from the $1,960.8 billion reported last month to $1,961.0 billion…seasonally adjusted inventories of manufacturers were estimated to be valued at $680,400 million, up 0.5% from August, inventories of retailers were valued at $642,496 million, 0.1% more than in August, while inventories of wholesalers were estimated to be valued at $644,556 million at the end of September, 0.4% higher than in August…

We had previously estimated that 3rd quarter GDP was underestimated by around 0.03 percentage points based on what the wholesales report showed, and that 3rd quarter GDP was overestimated by around 0.04 percentage points based on what the factory inventories report showedthe BEA’s Key source data and assumptions (xls) that accompanied the release of the advance estimate of 3rd quarter GDP indicates that they had estimated that the value of retail inventories would be unchanged in September before adjustment with the PPI, so the $0.423 billion increase that this report shows means that they underestimated the annualized 3rd quarter inventory component at an annual rate of around $1.7 billion….that would imply that the contribution of the retail inventory component of 3rd quarter GDP was underestimated by around 0.03 percentage points, so after netting out the 3 inventory changes, this report indicates an upward adjustment of around 0.02 percentage points to 3rd quarter GDP when the 2nd estimate is released at the end of November…

 

(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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