2nd estimate of 2nd quarter GDP; July’s income and outlays

The most important economic reports that were released this week were the 2nd estimate of 2nd quarter GDP and the July report on Personal Income and Spending, both from the Bureau of Economic Analysis ….the week also saw the release of the Case-Shiller Home Price Index for June, which is an index derived from the relative average of April, May and June home prices, and which reported that home prices nationally for those 3 months averaged 6.2% higher than the prices for the same homes that sold during the same 3 month period a year earlier, and the Chicago Fed National Activity Index (CFNAI) for July, a weighted composite index of 85 different economic metrics, which fell to +0.13 in July, down from a revised +0.48 in June…that left the 3 month average of the CFNAI at +0.05, down from +0.20 in June, which indicates national economic activity has been close to the historical trend over those recent months…

In addition, this week saw the release of the last two regional Fed manufacturing surveys for August: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose from +20 in July to +24 in August, suggesting an even stronger expansion of that region’s manufacturing, and the Dallas Fed Texas Manufacturing Outlook Survey for August, which indicated its general business activity index slipped from +32.2 in July to +30.9 in August, still indicating an ongoing robust expansion in manufacturing within the energy focused Texas economy…

2nd Quarter GDP Revised to Indicate Growth at a 4.2% Rate

The Second Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 4.2% rate in the quarter, revised from the 4.1% growth rate reported in the advance estimate last month, as growth in fixed investment was greater than previously estimated, while imports decreased rather than increased, the impact of which more than offset the smaller downward revisions to personal consumption expenditures and exports…..in current dollars, our second quarter GDP grew at a 7.6% annual rate, increasing from what would work out to be a $20,041.0 billion annual rate in the 1st quarter to a $20,411.9 billion annual rate in the 2nd quarter of this year, with the headline 4.2% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 3.0%, 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 from one 3 month period to the next, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes now 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 2nd estimate of 2nd quarter GDP, which is linked to by the BEA press release…specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2012; 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 GDP components…the 2nd 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 3.8% growth rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 5.7% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated dollar weighted consumer inflation grew at a 1.9% annual rate in the 2nd quarter, which was revised from the 1.8% PCE inflation rate reported a month ago…real consumption of durable goods grew at a 5.4% annual rate, which was revised from the 5.9% growth rate shown in the advance report, and added 0.60 percentage points to GDP, as real consumption of motor vehicles, furniture, recreational goods and vehicles and other durables all contributed significantly to the durable goods increase….real consumption of nondurable goods by individuals rose at a 8.6% annual rate, revised from the 9.3% increase rate reported in the 1st estimate, and added 0.52 percentage points to 2nd quarter economic growth, as growth in real clothing consumption at a 8.9% annual rate accounted for a third of the non-durables growth….at the same time, consumption of services grew at a 3.1% annual rate, statistically unrevised from the growth rate reported last month, and added 1.43 percentage points to the final GDP tally, with 8.7% growth in real consumption of food services providing the largest contribution…

Meanwhile, seasonally adjusted real gross private domestic investment grew at a 0.4% annual rate in the 2nd quarter, revised from the 0.5% investment contraction reported last month, as real private fixed investment grew at a 6.2% rate, rather than at the 5.4% rate reported in the advance estimate, while the previously reported contraction in inventory growth was revised slightly lower….real investment in non-residential structures was revised from growth at a 13.3% rate to growth at a 13.2% rate, while real investment in equipment was revised to show growth at a 4.4% rate, up from the 3.9% growth rate previously reported…at the same time, the quarter’s investment in intellectual property products was revised from growth at a 8.2% rate to growth at a 11.0% rate, while the contraction rate of residential investment was revised from -1.1% to -1.6% annually…after those revisions, the increase in investment in non-residential structures added 0.39 percentage points to the 2nd quarter’s growth rate, the increase in investment in equipment added 0.27 percentage points to the quarter’s growth, greater investment in intellectual property added 0.47 percentage points, while the decrease in investment in residential structures subtracted 0.06 percentage points from the 2nd quarter’s GDP growth…

At the same time, investment in real private inventories contracted at an inflation adjusted $26.9 billion rate in the 2nd quarter, revised from the originally reported inventory shrinkage at a $27.9 billion rate…this came after inventories had grown at an inflation adjusted $30.3 billion rate in the 1st quarter, and hence the $57.3 billion decrease in the rate of real inventory growth subtracted 0.97 percentage points from the quarter’s growth rate, revised from the 1.00 percentage point subtraction due to inventory contraction that was shown in the advance estimate….however, since shrinkage of inventories indicates that less of the goods produced during the quarter were left ‘sitting on the shelf’ or in a warehouse, the quarter over quarter decrease in their growth by $57.3 billion meant that real final sales of GDP were relatively greater by that much, or enough to boost 2nd quarter growth in real final sales of GDP to a 5.3% rate, revised from the 5.1% real final sales growth rate shown in the advance estimate, and a big jump from the real final sales growth at a 1.9% rate in 1st quarter, when that quarter’s increase in inventory growth meant that part of the increase in GDP had not been sold..

The previously reported increase in real exports was revised a bit smaller with this estimate, but at the same time the previously reported increase in real imports was revised to show a decrease, and as a result our foreign trade was an even greater contributor to GDP than was reported in the advance estimate…our real exports grew at a 9.1% rate rather than the 9.3% 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 growth added 1.10  percentage points to the 2nd quarter’s growth rate, a bit less than the 1.12  percentage point addition shown in the previous report….meanwhile, the previously reported 0.5% increase in our real imports was revised to a 0.4% decrease, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their decrease conversely added 0.07 percentage points to 2nd quarter GDP, rather than subtracting 0.06 percentage points….thus, our improving trade balance added a net 1.17 percentage points to 2nd quarter GDP, revised from the 1.06% percentage point addition that had been indicated in the advance estimate…

Finally, there were positive revisions to real government consumption and investment in this 2nd estimate, as the entire government sector grew at a 2.3% rate, revised from the 2.1% growth rate previously reported…real federal government consumption and investment was seen to have grown at a 3.7% rate from the 1st quarter in this estimate, which was revised from the 3.5% growth rate in the 1st estimate…real federal outlays for defense were revised to show growth at a 6.0% rate, rather than the 5.5% growth rate previously reported, and added 0.22% percentage points to 2nd quarter GDP, while all other federal consumption and investment grew at a 0.5% rate, down from the 0.6% rate previously reported, and added 0.01% percentage points to 2nd quarter GDP…meanwhile, real state and local consumption and investment grew at a 1.6% rate in the quarter, which was revised from the 1.4% growth rate reported in the 1st estimate, and added 0.17% percentage points to 2nd 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, thus indicating there was an increase in the output of those goods or services…

July Personal Income Up 0.3%, Personal Spending Up 0.4%, PCE Price Index Up 0.1%

Other than the employment report and the GDP report itself, the monthly report on Personal Income and Outlays from the Bureau of Economic Analysis is probably the most important regular economic release we see monthly, since each monthly report on personal consumption expenditures (PCE) accounts for roughly 23% of its quarter’s GDP by itself…in addition, this report also includes 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, monthly 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 July’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 June to July..

Thus, when the opening line of the press release for the July report tell us “Personal income increased $54.8 billion (0.3 percent) in July“, they mean that the annualized figure for seasonally adjusted personal income in July, $17,616.5 billion, was $54.8 billion, or a bit more than 0.3% greater than the annualized personal income figure of $17,561.7 billion extrapolated for June; the actual, unadjusted change in national personal income from June to July, which is an order of magnitude lower, is not yet given, despite an indication last month that unadjusted data would be made available…at the same time, annualized disposable personal income, which is income after taxes, rose by more than 0.3%, from an annual rate of $15,514.0 billion in June to an annual rate of $15,566.5 billion in July….the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized…in July, the largest contributors to the $54.8 billion annual rate of increase in personal income were a $31.4 billion increase in wages and salaries and a $10.2 billion increase in personal current transfer receipts from government programs such as social security…

For the personal consumption expenditures (PCE) that will be included in 3rd quarter GDP, BEA reports that they increased at a $49.3 billion rate, or by somewhat less than 0.4% from June, as the annual rate of PCE rose from $13,930.7 billion in June to $13,980.0 billion in July….June PCE was revised from $13,937.1 billion annually to $13,930.7 billion, while PCE for the months going back to April were also revised as well, all of which were already included in the revised 2nd estimate of 2nd quarter GDP which we reviewed earlier (data in this report, although released a business day later than the GDP release, is concurrent with GDP data)….total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $52.7 billion to $14,518.4 billion annually in July, which left total personal savings, which is disposable personal income less total outlays, at a $1,048.1 billion annual rate in July, virtually unchanged from the revised $1,048.4 billion in annualized personal savings in June…nonetheless, the personal saving rate, which is personal savings as a percentage of disposable personal income, still slipped to 6.7% in July from the June savings rate of 6.8%…

As you know, before personal consumption expenditures are used in the GDP computation, 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 now based on 2012 prices = 100, which is included in Table 9 in the pdf for this report…that index rose from 108.180 in June to 108.314 in July, a month over month inflation rate that’s statistically 0.1239%, which BEA reports as an increase of 0.1 percent, following an increase of 0.1 percent in the PCE price index reported for June…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 chained 2012 dollars, which are the means that the BEA uses to compare the real goods and services produced in one month or one quarter to the real goods and services produced in another….that result is shown in table 7 of the PDF, where we see that July’s chained dollar consumption total works out to 12,907.5 billion annually, 0.2306% more than June’s 12,877.8 billion, a difference in real PCE that the BEA reports as +0.2%…

However, to estimate the impact of the change in PCE on the change in GDP, the month over month change doesn’t help us much, since GDP is reported quarterly….thus we have to compare July’s real PCE to the the real PCE of the 3 months of the second quarter….while this report shows real PCE for those three months at an annual rate monthly, the BEA also provides the quarterly annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 2nd quarter was represented by 12,841.2 billion in chained 2009 dollars..(note, that’s the same as is shown in table 3 of the pdf for the 2nd quarter GDP report)….when we compare July’s adjusted PCE of 12,907.5 billion to the 2nd quarter real PCE of 12,841.2 billion, we find that July real PCE has grown at a 2.08% annual rate compared to the 2nd quarter….that means that even if July’s real PCE growth does not improve during August and September, growth in PCE would still add 1.44 percentage points to the growth rate of 3rd quarter GDP…

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most picked from the aforementioned GGO posts, contact me…)     

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tables and graphs for September 1

rig count summary:

August 31 2018 rig count summary

gasoline product supplied:

September 1 2018 gasoline demand as of August 24

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another sub par natural gas build, US oil production back at record high, refinery utilization rate highest in 17 years

oil prices rose this week for the first time in eight weeks, even as the front month contract shifted to October oil midweek, which was, at the time, priced $1.51 a barrel less than the expiring September contractafter falling $1.72 or 2.6% to $65.91 a barrel last week on concerns about falling global demand, US light sweet crude for September delivery rose 52 cents to $66.43 a barrel on Monday as trade war worries eased and oil traders turned to concerns about the impact of U.S. sanctions on Iranthe Iran sanctions rally then picked up steam on Tuesday, with September oil logging a fourth straight gain before expiring 92 cents higher at $67.35 a barrel, while at the same time oil for October delivery became the quoted contract and rose 42 cents to close Tuesday at $65.84 a barrelOctober oil contract prices then jumped $2.02, or more than 3% from that level on Wednesday to a 2 week high of $67.86 a barrel, after the weekly EIA report indicated that U.S. crude supplies fell much more than traders had anticipated…oil prices then steadied on Thursday, as trade talks between the US and China collapsed, offsetting the impact of lower crude inventories, with October US crude ending 3 cents lower at $67.83 a barrel…the rally resumed on Friday, however, amid reports that Iranian tanker loading were already down by 700,000 barrels per day during the first half of August, 3 months before the sanctions were to kick in, as U.S. crude went on to finish the day 89 cents or 1.3% higher at $68.72 a barrel…thus for the week, the widely quoted price of oil rose $2.81 a barrel, or more than 4%, after seven consecutive weekly declines, while the contract for October oil ended $3.51 a barrel or 5.4% higher, having closed the prior week at $65.21 barrel..

meanwhile, prices for natural gas for September delivery continued in the same narrow price range they’ve been in since Spring, even as the seasonal storage deficit has become critical…after ending last week at $2.946 per mmBTU, natural gas prices rose to as high as $2.993 per mmBTU in early trading Wednesday, before sliding to a 4.7 cent loss on Friday and ending the week at $2.917 per mmBTU….this week’s EIA natural gas storage report for week ending August 17th indicated that natural gas in storage in the US rose by 48 billion cubic feet to 2,435 billion cubic feet during the cited week, which still left our gas supplies 684 billion cubic feet, or 21.9% below the 3,119 billion cubic feet that were in storage on August 18th of last year, and 599 billion cubic feet, or 19.7% below the five-year average of 3,034 billion cubic feet of natural gas that are typically in storage heading into the third weekend of August….the 48 billion cubic feet increase in natural gas supplies was close to the expectations of most market participant surveys and thus had little impact on natural gas prices, but it was still below the 52 billion cubic foot average of natural gas that has typically been added to storage during the second full week of August in recent years, thus making for the 7th consecutive below average inventory build…with that in mind, we’ll again take a look at the graph from the natural gas storage report to see the effect of this string of below average additions..

August 25 2018 natural gas supplies as of August 17th

the above graph comes from this week’s Natural Gas Storage Report, and it shows the quantity of natural gas in storage in the lower 48 states over the period from August 2016 up to the week ending August 17th 2018 as a blue line, the average of natural gas in storage over the 5 years preceding the same dates shown as a heavy grey line, while the grey shaded background represents the range of the amount of natural gas in storage for any given time of year for the 5 years prior to the two years shown by the graph…thus the grey area also shows us the normal range of natural gas in storage as it fluctuates from season to season, with natural gas in storage underground normally building to a maximum by the end of October, falling through the winter, and usually bottoming out at the end of March, depending of course on the spring heating requirements for any given year…what we want to point out on that graph this week is the divergence between the 5 year average amount of natural gas in storage for any given date of the year, which is shown as a dark grey graph, and that of current supplies of natural gas, shown in blue…notice that the blue line shows that the quantity gas we had stored throughout the summer and fall of 2016 was at a record high for each week during the year, up until October, and then dropped to near normal going into 2017, despite a much milder than normal winter…nonetheless, we can see that our natural gas supplies stayed above the average level through most of 2017, and didn’t fall to below normal until the 2017-2018 heating season began…notice that since then, however, the gap separating the grey “normal” line and the blue current supply line has gotten increasingly wider, up until this summer, when the blue line representing current supplies has failed to keep up with the normal level of increase for 7 weeks straight….hence, instead of rebuilding our natural gas supplies back to a normal level before winter, each week we have been getting progressively farther away from what we should have stored before the heating season begins at the beginning of November…

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, covering the week ending August 17th, indicated that because of a large drop in our oil imports, we had to withdraw oil from our commercial crude supplies to meet the needs of our refineries for the fifteenth time in the past thirty weeks… our imports  of crude oil fell by an average of 1,496,000 barrels per day to an average of 7,518,000 barrels per day, after rising by an average of 1,083,000 barrels per day the prior week, while our exports of crude oil fell by an average of 437,000 barrels per day to an average of 1,155,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 6,363,000 barrels of per day during the week ending August 17th, 1,059,000 fewer 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 reported to be 100,000 barrels per day higher at a record 11,000,000 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 17,363,000 barrels per day during the reporting week… 

meanwhile, US oil refineries were using 17,892,000 barrels of crude per day during the week ending August 17th, 89,000 barrels per day less than the record amount they used during the prior week, while over the same period 834,000 barrels of oil per day were reportedly being pulled out of the oil that’s in storage in the US….hence, this week’s crude oil figures from the EIA appear to indicate that our total working supply of oil from net imports, from oilfield production, and from storage was 305,000 barrels per day more than what refineries reported they used during the week….to account for that disparity between the supply of oil and the disposition of it, the EIA needed to insert a (-305,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the 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”…since that “unaccounted for crude” figure was at +631,000 barrels per day during the prior week, we know that the week over week changes for one or more of this week’s EIA oil metrics must be in error by a statistically significant amount…(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) show that the 4 week average of our oil imports fell to an average of 8,053,000 barrels per day, now 2.2% less than the 8,233,000 barrel per day average that we were importing over the same four-week period last year….the 834,000 barrel per day decrease in our total crude inventories was all withdrawn from our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve remained unchanged, even as a new sale of 11 million barrels from those reserves was announced this week….this week’s crude oil production was reported being 100,000 barrels per day higher at a record 11,000,000 barrels per day because the output from wells in the lower 48 states increased by a rounded 100,000 barrels per day to 10,600,000 barrels per day while oil output from Alaska rose by 34,000 barrels per day, and hence the national total, which is now being rounded to the nearest 100,000 barrels per day to reflect the EIA’s inability to accurately model oil output from all the wells in the lower 48 states, was thus also up by 100,000 barrels per day…..US crude oil production for the week ending August 18th 2017 was reportedly at 9,528,000 barrels per day, so this week’s rounded oil production figure was roughly 15.4% above that of a year ago, and 30.5% 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…

meanwhile, US oil refineries were operating at 98.1% of their capacity in using 17,892,000 barrels of crude per day during the week ending August 17th, unchanged the prior week, again the highest refinery utilization rates seen in 17 years….the 17,892,000 barrels per day of oil that were refined this week were also at a seasonal high, now for the 12th week in a row, as compared to any previous 3rd week of August….this week’s refinery throughput was 2.5% higher than the 17,461,000 barrels of crude per day that were being processed during the week ending August 18th 2017, when US refineries were operating at 95.4% of capacity….

with the modest reduction in the amount of oil being refined this week, gasoline output from our refineries was likewise modestly lower, decreasing by 83,000 barrels per day to 10,151,000 barrels per day during the week ending August 17th, after our refineries’ gasoline output had increased by 321,000 barrels per day during the week ending August 10th…with this week’s decrease, however, our gasoline production during the week was 3.9% lower than what had been a record 10,566,000 barrels of gasoline that were produced daily during the same week of last year…meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) rose by 89,000 barrels per day to a seasonal high of 5,426,000 barrels per day, after rising by 100,000 barrels per day over the prior week…that meant this week’s distillates production was 6.6% higher than the 5,091,000 barrels of distillates per day that were being produced during the week ending August 18th, 2017…

even with the modest decrease in our gasoline production, our supply of gasoline in storage at the end of the week still rose by 1,200,000 barrels to a seasonal high of 234,328,000 barrels by August 17th, the 11th increase in 26 weeks, and the 25th increase in 41 weeks, as gasoline inventories, as usual, were being built up over the winter months….our supplies of gasoline rose this week because our imports of gasoline rose by 154,000 barrels per day to 817,000 barrels per day, while our exports of gasoline fell by 291,000 barrels per day to 644,000 barrels per day, and because the amount of gasoline supplied to US markets fell by 59,000 barrels per day to 9,453,000 barrels per day, after rising by 166,000 barrels per day the prior week…after this week’s increase, our gasoline inventories were 1.9% higher than last August 18th’s level of 229,902,000 barrels, and roughly 9.8% above the 10 year average of our gasoline supplies for this time of the year…     

meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased by 1,849,000 barrels to 130,838,000 barrels during the week ending August 17th, the 10th increase in 13 weeks…our supplies increased even though the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 106,000 barrels per day to 4,065,000 barrels per day, after decreasing by 43,000 barrels per day the prior week, and even though our exports of distillates rose by 185,000 barrels per day to 1,043,000 barrels per day, while our imports of distillates fell by 29,000 barrels per day to 145,000 barrels per day….however, since our distillate supplies are still coming off the 14 year seasonal low that they hit 4 weeks ago, because they had been falling during the spring, when distillates supplies are usually increasing, this week’s inventory increase still leaves our distillates supplies 11.8% below the 148,415,000 barrels that we had stored on August 18th, 2017, and roughly 12.1% lower than the 10 year average of distillates stocks for this time of the year…  

finally, with our oil imports down by nearly 1.5 million barrels per day, our commercial supplies of crude oil decreased for the 17th time in 2018 and for the 30th  time in the past year, falling by 5,836,000 barrels during the week, from 414,194,000 barrels on August 10th to 408,358,000 barrels on August 17th …but even with that decrease, our crude oil inventories are still a bit above the five year average of crude oil supplies for this time of year, and roughly 15.5% above the 10 year average of crude oil stocks for the 3rd week of August…but since our crude oil inventories had been falling through most of the past year and a half, our oil supplies as of August 17th were 11.8% below the 463,165,000 barrels of oil we had stored on August 18th of 2017, 17.2% below the 492,962,000 barrels of oil that we had in storage on August 19th of 2016, and 2.5% below the 418,990,000 barrels of oil we had in storage on August 21st of 2015, when US supplies of oil had already risen above the nearly stable levels of under 400 million barrels that we’d seen during the prior years…  

This Week’s Rig Count

US drilling activity decreased for the sixth time in eleven weeks during the week ending August 24th, following 11 consecutive weeks of increases, as the steady increases in drilling for oil we saw with higher oil prices during the first half of this year have stalled since oil futures’ prices have shifted into deep backwardation…. Baker Hughes reported that the total count of rotary rigs running in the US fell by 13 rigs to 1044 rigs over the week ending on Friday, which was still 104 more rigs than the 940 rigs that were in use as of the August 25th report of 2017, but was still 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 was down by nine rigs at 860 rigs this week, which was still 101 more oil rigs than were running a year ago, while it was still 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 fell by 4 rigs to 182 rigs this week, which was only 2 more rigs than the 184 natural gas rigs that were drilling a year ago, and way down from the modern high of 1,606 natural gas rigs that were deployed on August 29th, 2008…meawhile, two rigs drilling exploratory wells considered to be “miscellaneous” continued operating this week, up from just one such “miscellaneous” rig a year ago…

three of the rigs that were shut down this week had been drilling from platforms in the Gulf of Mexico, cutting the Gulf of Mexico rig count down to 16 rigs, down from the 17 rigs that were drilling in the Gulf last year at this time…however, two rigs continued drilling offshore from Alaska this week, so the total national offshore count is at 18 rigs, which is thus up from last year’s total of 17 offshore rigs, as a year ago there was no offshore drilling other than in the Gulf…in addition to Gulf rigs, one of the rigs that had been drilling through an inland body of water in southern Louisiana was also shut down this week, leaving the ‘inland waters’ rig count at 1, down from the 3 rigs that were drilling on inland waters a year ago…

the count of active horizontal drilling rigs was down by 3 rigs to 919  horizontal rigs this week, which was still 123 more horizontal rigs than the 796 horizontal rigs that were in use in the US on August 25th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the vertical rig count decreased by 2 rigs to 63 vertical rigs this week, which was thus down from the 64 vertical rigs that were in use during the same week of last year…moreover, the directional rig count decreased by 8 rigs to 62 directional rigs this week, which was also down from the 80 directional rigs that were operating on August 25th 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 August 24th, the second column shows the change in the number of working rigs between last week’s count (August 17th) and this week’s (August 24th) count, the third column shows last week’s August 17th active rig count, the 4th column shows the change between the number of rigs running on Friday and those of the equivalent weekend report 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 25th of August, 2017…  

August 24 2018 rig count summary

as you can see, most of this week’s drilling pullback was in two states; Louisiana, which shed a total of 7 rigs, and North Dakota, which was down by 4 Williston oil rigs…the Louisiana count includes the 3 newly idled offshore rigs that were in the state’s waters in the Gulf of Mexico, the inland waters rig that was shut down, and three rigs in the northern part of the state, with some of those in the Haynesville shale, which saw a 3 rig increase on the Texas side of the state line, thus accounting for the Texas rig increase, even as other rigs were shifted elsewhere around Texas at the same time…note that the count in the major basins was down by 6 rigs, while the total horizontal count was down by just three; that would mean that 3 horizontal rigs began drilling elsewhere, in a basin not tracked separately by Baker Hughes…where that might be is not immediately evident, so one would have to dig through the individual well logs in the Baker Hughes pivot table to ascertain where…meanwhile, there are no changes hidden in the basin counts above, such as a switch of a rig from oil to gas drilling or vice-versa; what we see above are actually the only basin changes that occurred…thus, natural gas rigs were shut down in Ohio’s Utica and Pennsylvania’s Marcellus, while an additional gas directed rig was added in the Haynesville…the other 3 natural gas rigs that were shut down would have thus had to have been among the rigs other than those we’ve already accounted for, with even the three Louisiana offshore rigs among the likely possibilities….

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July’s durable goods, new and existing home sales

This week’s widely watched releases included the July advance report on durable goods and the July report on new home sales, both from the Census bureau, and the Existing Home Sales Report for July from the National Association of Realtors (NAR)…..in addition, this week saw the release of the Kansas City Fed manufacturing survey for August, which covers western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico…they reported their broadest composite index fell to +14 in August, down from readings of +23 in July and +28 in June, suggesting a slower pace of expansion in that region’s manufacturing industries..

July Durable Goods: New Orders Down 1.7%, Shipments Down 0.2%, Inventories Up 1.3%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for July (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods fell by $4.3 billion or 1.7 percent to $246.9 billion in July, following a revised increase of 0.7% to $251.1 billion in June new orders, which had been originally reported as a 1.0% increase to $251.9 billion of new orders…despite the July decrease, however, year to date new orders are now running 8.6% above those of 2017, a slight increase from the 8.4% year over year change we saw in this report last month…as is usually the case, the volatile monthly change in new orders for transportation equipment drove the July headline change, as those transportation equipment orders fell $4.6 billion or 5.3 percent to $82.8 billion, on a 35.4% decrease to $9,213 million in new orders for commercial aircraft and a 34.6% decrease to $4,289 million in new orders for defense aircraft….excluding new orders for ‘transportation’ equipment, other new orders were up 0.2% in July, as new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, rose 1.4% to $69,683 million…

The seasonally adjusted value of July’s shipments of durable goods, which will be inputs into various components of 3rd quarter GDP after adjusting for changes in prices, fell by $0.5 billion or 0.2 percent to $250.8 billion, after June shipments had increased by 1.6% from those of May….a 1.9% drop in shipments of transportation equipment was the reason for the July decrease, as they fell $1.6 billion to $83.9 billion, on a 25.4% decrease in shipments of commercial aircraft…excluding shipments of transportation equipment, shipments of other durable goods rose 0.6%…

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the eighteenth time in the last nineteen months, increasing by $5.0 billion or 1.3 percent to $408.3 billion, after end of June durables inventories were revised from $402.8 billion to $403.2 billion, now statistically unchanged from May…an increase in inventories of transportation equipment were the major factor in the inventory increase, as they rose $4.4 billion or 3.5 percent to $131.3 billion, on a 6.7% increase to $67,061 million in inventories of commercial aircraft…excluding the increase in inventories of transportation equipment, all other durable goods inventories still increased 0.2% to $276,919 million…

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but obviously volatile new orders, rose for the eighth time in nine months, but by just $0.1 billion to $1,164.7 billion, which is considered statistically unchanged…that followed a June increase of 0.3% to $1,164.66 billion that was was revised from the previously reported 0.4% increase to $1,165.1 billion…..a $1.1 billion or 0.1 percent decrease to $800,775 million in unfilled orders for transportation equipment limited the overall increase, as unfilled orders excluding transportation equipment were up 0.3% to $363,951 million….compared to a year earlier, the unfilled order book for durable goods is now 3.9% above the level of last July, as unfilled orders for transportation equipment are still 3.3% above their year ago level, despite a 2.2% decrease in the backlog of orders for defense aircraft…  

New Home Sales Reported Lower in July

The Census report on New Residential Sales for July (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 627,000 new homes a year, which was 1.7 percent (±14.7 percent)* below the revised June rate of 638,000 new single family home sales a year, but 12.8 percent (±15.7 percent)* above the estimated annual rate that new homes were selling at in July of last year….the asterisk indicates that based on their small sampling, Census could not be certain whether July new home sales rose or fell from those of June or even from those in July 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….hence, these initial new home sales reports are not very reliable and often see significant revisions…with this report; sales new single family homes in June were revised from the annual rate of 631,000 reported last month to a 638,000 a year rate, and home sales in May, initially reported at an annual rate of 689,000 and revised down to a 666,000 a year rate last month, were revised further down to a 654,000 annual rate with this report, while April’s annualized home sales rate, initially reported at 662,000 and revised from 646,000 to 641,000 last month, were also revised lower, to a 633,000 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 showed that approximately 53,000 new single family homes sold in July, down from the 58,000 new homes that sold in June and the 62,000 that sold in May….the raw numbers from Census field agents further estimated that the median sales price of new houses sold in July was $328,700, up from the median sale price of $310,000 in June and up from the median price of $322,900 in July a year ago, while the average July new home sales price was $394,300, up from $369,500 average sales price in June, and up from the average sales price of $372,400 in July a year ago….a seasonally adjusted estimate of 309,000 new single family houses remained for sale at the end of July, which represents a 5.9 month supply at the July sales rate, up from the reported 5.7 month supply of unsold homes in June….for more details and graphics on this report, see Bill McBride’s two posts, New Home Sales decrease to 627,000 Annual Rate in July and A few Comments on June New Home Sales

Existing Home Sales Fall 0.7% in July to Slowest Pace in 2 Years

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell 0.7% from June to July, projecting that 5.34 million homes would sell over an entire year if the July home sales pace were extrapolated over that year, a pace that was also 1.5% below the annual sales rate projected in July of a year ago, and the slowest pace in two years….June home sales at a 5.38 million annual rate were unrevised from last month’s report…the NAR also reported that the median sales price for all existing-home types was $269,600 in July, 4.5% higher than in July a year earlier, which they report as “the 77th straight month of year-over-year gains“…..the NAR press release, which is titled “Existing-Home Sales Slip 0.7 Percent in July“, 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….since 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…

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 522,000 homes sold in July, down by 14.5% from the 570,000 homes that sold in June, but up 1.8% from the estimated 513,000 homes that sold in July of last year, so we can see there was a sizable seasonal adjustment just to bring the annualized published figures up to the level reported…that same pdf indicates that the median home selling price for all housing types fell 1.5%, from a revised $273,800 in June to $269,600 in July, while the average home sales price was $307,800, down 1.3% from the $311,900 average selling price in June, but up 3.0% from the $298,800 average home sales price of July a year ago, with the regional average home sales prices ranging from a low of $240,400 in the Midwest to a high of $410,600 in the West…for additional commentary with long term graphs on this report, see “NAR: Existing-Home Sales Decline in July” and “A Few Comments on June Existing Home Sales” from Bill McBride at Calculated Risk…

 

(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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graphs and tables for August 25th

rig count summary:

August 24 2018 rig count summary

natural gas supplies:

August 25 2018 natural gas supplies as of August 17th

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oil refining at a record pace; largest jump in US crude supplies in 17 months; record global oil output; record backlog of DUC wells, et al

oil prices ended lower for the 7th week in a row, although as we’ve explained previously, one week in that stretch was due to the switch from quoting the August oil contract to quoting the lower priced September oil contract….after falling 86 cents, or 1.2% to $67.63 a barrel in volatile trading last week, prices for US light sweet crude for September fell 43 cents to $67.20 a barrel on Monday after OPEC lowered their estimate for next year’s oil demand growth while US oil supplies increased at the Cushing OK delivery hub…while NYMEX oil prices rallied to as high as $68.37 a barrel on Tuesday morning on news that the Saudis told OPEC that it had cut crude output by 200,000 barrels per day, that rally fizzled on a strengthening U.S. dollar and concerns about the financial crisis in Turkey and oil ended the day 16 cents lower at $67.04 a barrel…oil prices then plunged on Wednesday after the weekly EIA data showed a big, unexpected jump in U.S. crude supplies, with WTI for September delivery falling $2.03, or 3%, to settle at $65.01 a barrel, its lowest close since June 6th…oil prices recovered a bit on Thursday, rising 45 cents to $65.46 a barrel, on prospects of renewed US-China trade talks, alleviating some of the trade war.fears that had pushed prices lower…that positive sentiment carried into Friday, as oil prices rose another 45 cents to $65.91 a barrel, but still ended with a $1.72 or a 2.6% loss on the week on concerns that oversupply would weigh on U.S. markets while trade disputes and slowing global economic growth would dampen global demand for oil.

natural gas prices for September, meanwhile, were little changed on the week, ending just two-tenths of a cent higher at 2.946 per mmBTU after a 3.8 cent increase on Friday reversed the losses from earlier in the week…while the increasing deficit of natural gas supplies heading into winter have provided an impetus for higher prices on the winter contracts, with January natural gas contracts closing at $3.168  per mmBTU and February gas closing at $3.132 per mmBTU, China’s threat of a retaliatory 25% tariff on LNG has thrown the future of natural gas demand into questionthis week’s EIA natural gas storage report for week ending August 10th indicated that natural gas in storage in the US rose by 33 billion cubic feet to 2,387 billion cubic feet during the cited week, which left our gas supplies 687 billion cubic feet, or 22.3% below the 3,074 billion cubic feet that were in storage on August 11th of last year, and 595 billion cubic feet, or 20.0% below the five-year average of 2,982 billion cubic feet of natural gas that are typically in storage heading into the second weekend of August….an S&P Global Platts’ survey of analysts had forecast that 30 billion cubic feet of natural gas would be injected into storage during the week ended August 11th, so the actual 33 billion cubic feet increase was higher than expectations and thus contributed to a 4.6 cent natural gas price drop after the report, but that 33 billion cubic foot increase was still well below the 56 billion cubic foot average of surplus natural gas that has typically been added to storage during the first full week of August in recent years, thus making for the 6th consecutive below average build…

checking the historical natural gas storage archive files, we find that this week’s natural gas supplies of 2,387 billion cubic feet are again the lowest for this time of year since August 8th, 2003, when natural gas supplies had fallen to 2,222 billion cubic feet…the only other early August records that even came close to this year’s nadir were on August 8th of 2014, when natural gas supplies were at 2,467 billion cubic feet and on August 8th of 2008, when natural gas supplies were at 2,567 billion cubic feet…Platts Analytics is now estimating that our supplies will start the natural gas heating season at 3.37 trillion cubic feet, roughly a 500 billion cubic feet deficit from normal….to hit even that low target, we’d have to add an average of more that 75 billion cubic feet over the next 13 weeks…since we have averaged a 39 billion cubic foot weekly injection over the past 6 weeks, we’ll have to step up the pace quite a bit this fall to meet that Platts estimate…

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, covering the week ending August 10th, indicated that because of a big jump in our oil imports and a modest drop in our oil exports, we had a surplus of oil to add to our domestic commercial crude supplies for the fifteenth time in the past twenty-nine weeks…. our imports of crude oil rose by an average of 1,083,000 barrels per day to an average of 9,014,000 barrels per day, after rising by an average of 182,000 barrels per day the prior week, while our exports of crude oil fell by an average of 258,000 barrels per day to an average of 1,592,000 barrels per day during the week, which meant that our effective trade in oil worked out to a net import average of 7,422,000 barrels of per day during the week ending August 10th, 1,341,000 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 reported to be 100,000 barrels per day higher at 10,900,000 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 18,322,000 barrels per day during the reporting week… 

at the same time, US oil refineries were using a record 17,981,000 barrels of crude per day during the week ending August 10th, 383,000 barrels per day more than they used during the prior week, while over the same week 972,000 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 appear to indicate that our total working supply of oil from net imports and from oilfield production was 631,000 barrels per day short of what was added to storage plus what refineries reported they used during the week….to account for that disparity between the supply and the disposition of oil, the EIA needed to insert a (+631,000) barrel per day figure onto line 13 of the weekly U.S. Petroleum Balance Sheet to make the data for the 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”…with a difference between oil supply and its disposition as large as that, we have to consider the likelihood that one or more of this week’s EIA oil metrics contains a statistically significant error…(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) show that the 4 week average of our oil imports rose to an average of 8,116,000 barrels per day, which was just 0.9% more than the 8,046,000 barrel per day average that we were importing over the same four-week period last year….the 972,000 barrel per day increase in our total crude inventories was all added to our commercially available stocks of crude oil, as the amount of oil in our Strategic Petroleum Reserve remained unchanged….this week’s crude oil production was reported being up by 100,000 barrels per day to 10,900,000 barrels per day even as the output from wells in the lower 48 states was reportedly unchanged at 10,500,000 barrels per day because oil output from Alaska rose by 60,000 barrels per day, and since the national total is now being rounded to the nearest 100,000 barrels per day to more reflect the EIA’s inability to accurately model oil output from all the wells in the lower 48 states, that 60,000 barrels per day increase was enough to bump the rounded national total up by 100,000 barrels per day…..US crude oil production for the week ending August 11th 2017 was reportedly at 9,502,000 barrels per day, so this week’s rounded oil production figure was roughly 14.7% above that of a year ago, and 29.3% 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…

meanwhile, US oil refineries were operating at 98.1% of their capacity in using 17,981,000 barrels of crude per day during the week ending August 10th, up from 96.6% of capacity the prior week, and the highest refinery utilization rate since our refineries operated at 98.9% of capacity during the week ending September 11, 1998….the 17,981,000 barrels per day of oil that were refined this week were the most barrels refined in any week on record, topping the record level set just seven weeks ago during the week ending June 22nd, and capping off an 11 week run when our seasonal refinery throughput was higher than ever before…hence, this week’s refinery throughput was also 2.4% higher than the 17,565,000 barrels of crude per day that were being processed during the week ending August 11th 2017, when US refineries were operating at 96.1% of capacity….

with our oil refining now at a new record high, we’ll take a look at a graph of the recent history of that metric for some perspective…

August 15 2018 refinery throughput as of Aug 10

the above graph of US refinery throughput came from the weekly package of oil graphs that John Kemp, senior energy analyst and columnist with Reuters, provides by email on Wednesdays, which is also available as a pdf here; it shows US refinery throughput in thousands of barrels per day by “day of the year” for the past ten years, with the past ten year range of our refinery throughput for any given date shown as a light blue shaded area, and the median of our refinery throughput, or the middle of the 10 year daily range, traced by the blue dashes over each day of the year….the graph also shows the number of barrels of oil refined for each week in 2017 traced by a yellow line, with our year to date oil refining for each week of 2018 traced by the red graph…you can clearly see that except for the disruptions to refining caused by last year’s hurricanes, 2017’s refining in yellow had been at the top of the historical range almost all year, and that the pace of refining in 2018 in red has generally been above that, except for during  late April and May…you can also see that the summer is usually when refiners see their seasonal highs, so given that we’ve been running refineries at a pace above that of the prior years for almost two years running, a breakout to a new record high at this time of year was not unexpected…

with the record amount of oil being refined this week, gasoline output from our refineries was considerably higher, increasing by 321,000 barrels per day to 10,234,000 barrels per day during the week ending August 10th, after our refineries’ gasoline output had inexplicably decreased by 570,000 barrels per day during the week ending August 3rd…as a result of this week’s increase, our gasoline production during the week was 1.9% higher than the 10,048,000 barrels of gasoline that were being produced daily during the same week of last year…meanwhile, our refineries’ production of distillate fuels (diesel fuel and heat oil) rose by 100,000 barrels per day to a seasonal high of 5,337,000 barrels per day, after rising by 78,000 barrels per day over the prior week…however, this week’s distillates production was only 0.9% higher than the 5,287,000 barrels of distillates per day that were being produced during the week ending August 11th, 2017…

however, even with the increase in our gasoline production, our supply of gasoline in storage at the end of the week still fell by 740,000 barrels to 233,128,000 barrels by August 10th, the 15th decrease in 25 weeks, but just the 16th decrease in 40 weeks, as gasoline inventories, as usual, were being built up over the winter months….our supplies of gasoline fell this week because our exports of gasoline rose by 347,000 barrels per day to 935,000 barrels per day while our imports of gasoline fell by 272,000 barrels per day to 663,000 barrels per day, and because the amount of gasoline supplied to US markets rose by 166,000 barrels per day to 9,512,000 barrels per day, after falling by 532,000 barrels per day the prior week…but even after this week’s decrease, our gasoline inventories were still fractionally higher than last August 11th’s level of 231,125,000 barrels, and roughly 9.4% above the 10 year average of our gasoline supplies for this time of the year…     

meanwhile, with the increase in our distillates production, our supplies of distillate fuels increased by 3,566,000 barrels to 128,989,000 barrels during the week ending August 10th, the 9th increase in 12 weeks…our supplies increased as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 43,000 barrels per day to 3,959,000 barrels per day, after increasing by 391,000 barrels per day the prior week, and as our exports of distillates fell by 185,000 barrels per day to 1,043,000 barrels per day,  while our imports of distillates rose by 5,000 barrels per day to 174,000 barrels per day….however, since our distillate supplies are still coming off a 14 year seasonal low hit just 3 weeks ago, after falling during a time of year when distillates supplies are usually increasing, this week’s inventory increase still leaves our distillates supplies 13.1% below the 148,387,000 barrels that we had stored on August 11th, 2017, and roughly 12.8% lower than the 10 year average of distillates stocks for this time of the year…     

finally, with our oil imports increasing by nearly 1.1 million barrels per day, our commercial supplies of crude oil increased for the 16th time in 2018 and for the 22nd time in the past year, rising by 6,805,000 barrels during the week, from 407,389,000 barrels on August 3rd to 414,194,000 barrels on August 10th…that increase now means our crude oil inventories are now a bit above the five year average of crude oil supplies for this time of year for the first time this year, and roughly 24% above the 10 year average of crude oil stocks for the 2nd week of August…however, since our crude oil inventories had been falling through most of the past year and a half, our oil supplies as of August 10th were still 11.2% below the 466,492,000 barrels of oil we had stored on August 11th of 2017, 15.6% below the 490,461,000 barrels of oil that we had in storage on August 12th of 2016, and 2.4% below the 424,442,000 barrels of oil we had in storage on July 31st of 2015, when US supplies of oil had already risen above the nearly stable levels of under 400 million barrels we saw during the prior years…   

OPEC’s Monthly Oil Market Report 

next we’ll take a look at OPEC’s August Oil Market Report (covering July OPEC & global oil data), which was released on Monday and 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 57 of that report (pdf page 65), 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…

July 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 40,700 barrels per day to 32,323,000 barrels per day in July, from their June production total of 32,283,000 barrels per day….however, that June figure was originally reported as 32,327,000 barrels per day, so OPEC’s June output was therefore revised 44,000 barrels per day lower with this report (for your reference, here is the table of the official June 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 78,500 barrels per day in the oil output from Kuwait, of 70,500 barrels per day in the output from Nigeria, and of 69,200 barrels per day in the output from the Emirates were the primary reasons that the cartel’s output rose, as those increases offset the decrease of 56,700 barrels per day in Libyan output, the decrease of 56,300 barrels per day in Iranian output, the decrease of 56,200 barrels per day in Saudi output, and the decrease of 47,700 barrels per day in Venezuelan output…the OPEC pledge to pump more oil in the second half of 2018 notwithstanding, OPEC’s output excluding new member Congo was at 32,010,000 barrels per day in July, still 720,000 barrels per day below the 32,730,000 barrels per day revised quota they agreed to at their November 2017 meeting, mostly on the big drop in Venezuelan output… 

the next graphic we’ll include shows us both OPEC and world monthly oil production on the same graph, over the period from August 2016 to July 2018, and it comes from the page numbered 58 (pdf page 66) of the August 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 metrics for global output shown on the right scale…      

July 2018 OPEC report global oil supply

OPEC’s preliminary estimate indicates that total global oil production rose by a rounded 680,000 barrels per day to a record high 98.53 million barrels per day in July, apparently after June’s global output total was revised down by 160,000 barrels per day from the 98.01 million barrels per day global oil output that was reported a month ago, as non-OPEC oil production rose by 640,000 barrels per day in July after that revision….global oil output for July was also 1.74 million barrels per day, or 1.3% higher than the 97.30 million barrels of oil per day that were being produced globally in July a year ago (see the August 2017 OPEC report online (pdf) for the year ago details)…with the jump in global output, OPEC’s July oil production of 32,323,000 barrels per day represented 32.8% of what was produced globally during the month, down from their 33.0% of global share reported for June…OPEC’s July 2017 production was at 32,869,000 barrels per day, which means that the 13 OPEC members who were part of OPEC last year, excluding new members Congo and Equatorial Guinea, are now producing 985,000 fewer barrels per day of oil than they were producing a year ago, during the seventh month that their production quotas were in effect, with a 432,000 barrel per day decrease in output from Venezuela and a 337,000 barrel per day decrease in output from Libya from that time largely responsible for the cartel’s output drop… 

despite the 680,000 barrel per day increase in global oil output in July, an increase in summertime 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… 

July 2018 OPEC report global oil demand

the table above comes from page 31 of the July  OPEC Monthly Oil Market Report (pdf page 39), 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 of the fourth column, we’ve circled in blue the figure that’s relevant for July, which is their revised estimate of global oil demand during the third quarter of 2018…     

OPEC’s estimate is that during the 3rd quarter of this year, all oil consuming regions of the globe will be using 99.44 million barrels of oil per day, which was a upward revision of a rounded 0.03 million barrels of oil per day from their prior estimate for the quarter….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 98.53 million barrels per day during July, which means that there was a shortfall of around 910,000 barrels per day in global oil production vis-a vis the demand estimated for the month…  

note that this report also revised oil demand figures for the 1st and second quarters, which we’ve circled in green; that means our previous estimates of surplus or shortfall for those months will have to be revised as well…a month ago, we estimated there was a small shortfall of around 30,000 barrels per day in global oil production vis-a vis the demand in June…while oil demand for the 2nd quarter was revised 120,000 barrels per day lower (as you see in the green ellipse above), we also noted earlier that June’s global oil output total was revised down by 160,000 barrels per day from the 98.01 million barrels per day global total that was reported a month ago; that means our revised oil shortfall for June will be around 70,000 barrels per day…

with the downward revision of 120,000 barrels per day to 2nd quarter demand, the shortfall for May now works out to 510,000 barrels per day, revised from the 630,000 barrel per day shortfall we had figured on a month ago….the 2nd quarter revision to global demand also means that the global shortfall for April would be revised from the 440,000 barrels per day that we figured last month to 320,000 barrels per day… 

however, as is also circled in green above, while global oil demand figures for the second quarter were revised lower, global oil demand figures for the first quarter of 2018 were revised 10,000 barrels per day higher, which means that our previously recomputed oil surplus for the first quarter of 2018 will also have to be recomputed again….since we had figured a global oil surplus of 130,000 barrels per day for March, a surplus of 310,000 barrels per day for February, and a surplus of 150,000 barrels per day for January, the revision means that our new figures show a surplus of 120,000 barrels per day for March, a surplus of 300,000 barrels per day for February, and a surplus of 140,000 barrels per day for January….totaling up all these estimates, that would mean that for the first seven months of 2018, global oil demand exceeded production by roughly 39,260,000 barrels, a relatively small net oil shortfall that is the equivalent of roughly nine and a half hours of global oil production at the July production rate…  

This Week’s Rig Count

the pace of US drilling activity stalled during the week ending August 17th, after increasing 15 out of the most recent 20 weeks….Baker Hughes reported that the total count of rotary rigs running in the US was unchanged at 1057 rigs over the week ending on Friday, which was still 111 more rigs than the 946 rigs that were in use as of the August 18th report of 2017, but was still 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 was unchanged at 869 rigs this week, which was still 106 more oil rigs than were running a year ago, while it was still 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 also unchanged at 186 rigs this week, which was up by 4 rigs from the 182 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…in addition, rigs drilling two exploratory wells considered to be “miscellaneous” continued this week, also unchanged, in contrast to a year ago, when all rigs were specifically targeting either oil or gas..

another Gulf of Mexico drilling platform was started back up this week, so there are now 19 rigs drilling in the Gulf of Mexico, up from the 16 rigs that were drilling in the Gulf last year at this time…in addition, two rigs continued drilling offshore from Alaska this week, so the total national offshore count is now at 21 rigs, up from a total of 16 offshore rigs a year ago, a time when there was no drilling elsewhere other than in the Gulf…

the count of active horizontal drilling rigs was down by 2 rigs to 922 horizontal rigs this week, which was still 123 more horizontal rigs than the 799 horizontal rigs that were in use in the US on August 18th of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…at the same time, the vertical rig count decreased by 4 rigs to 65 vertical rigs this week, which was also down from the 66 vertical rigs that were in use during the same week of last year…on the other hand, the directional rig count increased by 6 directional rigs this week, which was still down from the 81 directional rigs that were operating on August 18th 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 August 17th, the second column shows the change in the number of working rigs between last week’s count (August 10th) and this week’s (August 17th) count, the third column shows last week’s August 10th active rig count, the 4th column shows the change between the number of rigs running on Friday and those of the equivalent weekend report 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 18th of August, 2017…       

August 17 2018 rig count summary

there’s not much that isn’t obvious here, except that it appears that at least two and probably three rigs that had been drilling in the Permian on the New Mexico side of the Texas border were either shut down or moved to Texas this week, as the core Permian Texas Oil District saw an increase of three rigs, and Texas District 7B, at the edge of the Permian, also saw an additional rig start up…outside of the Permian, note the large number of rig reductions spread throughout the other major basins, including the 3 rig drop in the Cana Woodford or Oklahoma and the decreases of two rigs each in the Mississippian Lime of the Kansas-Oklahoma border region and the Granite Wash of the Texas-Oklahoma panhandle region; we would not be seeing drilling pullbacks like that in those oil-bearing strata if fracking were a highly profitable venture at current oil prices, given there is still some degree of price backwardation…for rigs targeting natural gas, which were on net unchanged, we have an increase of two in the Pennsylvania Marcellus, an increase of one in the Arkoma Woodford of Oklahoma, and an increase of one in the Granite Wash, where three oil rigs were shut down at the same time, offset by rig decreases in Ohio’s Utica shale, the West Virginia Marcellus, the Louisiana Haynesville, and one in a basin not tracked separately by Baker Hughes…we’ll also note that outside of the major producing states shown above, Nebraska had the rig that started up last week shut down this week; i dont really know what that’s about, since the state has only seen oilfield activity for two weeks over the past two years…

DUC well report for July

Monday of this past week also saw the release of the EIA’s Drilling Productivity Report for August, which includes the EIA’s July data for drilled but uncompleted oil and gas wells in the 7 most productive shale regions…for the 22nd consecutive month, this report again showed an increase in uncompleted wells nationally in June, even as drilling of new wells was down for the 2nd consecutive month….like most previous months, this month’s uncompleted well increase was due to a big increase of newly drilled but uncompleted wells (DUCs) in the Permian basin of west Texas, with a modest increase of uncompleted wells in 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 165, from 7,868 wells in June to 8,033 wells in July, again the highest number of such unfracked wells in the history of this report….that was as 1,441 wells were drilled in the 7 regions that this report covers (representing 87% of all U.S. onshore drilling operations) during July, down from 1,448 in June, while 1,276 wells were completed and brought into production by fracking, a increase of one completion over the prior month…hence, at the July completion rate, the 8,033 drilled but uncompleted wells left at the end of the month represent a 6.3 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 July DUC well increases were predominantly oil wells, with most of those in the Permian basin…the Permian saw its total count of uncompleted wells rise by 167, from 3,303 DUC wells in June to 3,470 DUCs in July, as 601 new wells were drilled into the Permian but only 434 wells in the region were fracked…at the same time, DUC wells in the Eagle Ford of south Texas rose by 32, from 1,480 DUC wells in June to 1,512 DUCs in July, as 207 wells were drilled in the Eagle Ford during July, while 175 Eagle Ford wells were completed…over the same period, the number of DUC wells in the Anadarko region centered in & around Oklahoma increased by 7 to 923, as 167 wells were drilled into the Anadarko basin while 160 Anadarko wells were fracked….in addition, DUC wells in the Bakken of North Dakota rose by 4, from 756 DUC wells in June to 760 DUCs in July, as 131 wells were drilled into the Bakken in July while 127 drilled wells in that basin were completed…meanwhile, the natural gas producing Haynesville shale of the northern Louisiana-Texas border region saw their uncompleted well inventory remain unchanged at 182, as 54 wells were drilled into the Haynesville during July, while 54 Haynesville wells were fracked during the same period…on the other hand, the drilled but uncompleted well count in the Niobrara chalk of the Rockies front range decreased by 40 to 432, as just 158 Niobrara wells were being drilled while 198 Niobrara wells were being fracked…similarly, the drilled but uncompleted well count in the Appalachian region, which includes the Utica shale, fell by 5 wells, from 759 DUCs in June to 754 DUCs in July, as 123 wells were drilled into the Marcellus and Utica shales, while 128 of the already drilled wells in the region were fracked….thus, for the month of July, DUCs in the 5 oil basins tracked by in this report (ie., the Anadarko, Bakken, Niobrara, Permian, and Eagle Ford) increased by 170 wells to 7,097 wells, while the uncompleted well count in the natural gas regions (the Marcellus, Utica, and the Haynesville) decreased by a net of 5 wells to 936 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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July’s retail sales, industrial production, and new home construction; June’s business inventories

The past week’s key reports were the Retail Sales for July and Business Sales and Inventories for June, both from the Census bureau, the July report on Industrial Production and Capacity Utilization from the Fed, and the July report on New Residential Construction from the Census Bureau…other reports released this week included Regional and State Employment and Unemployment for July and the July Import-Export Price Index, both from the Bureau of Labor Statistics, and the first two regional Fed manufacturing surveys for August: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from +22.6 in July to +25.6 in August, suggesting a broad based expansion of First District manufacturing, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell from +26.7 in July to +11.9 in August, still suggesting ongoing growth of that region’s manufacturing industries, as any positive reading would…

July Retail Sales Rose 0.5% After May and June Sales were Revised Lower

Seasonally adjusted retail sales were 0.5% higher in July after retail sales for May and June were revised lower….the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $507.5 billion during  the month, which was 0.5 percent (± 0.4 percent) higher than June’s revised sales of $504.9 billion and 6.4 percent (±0.5 percent) above the adjusted sales in July of last year…June’s seasonally adjusted sales were revised from the $506.8 billion reported last month to $504.9 billion, while May sales were revised from $504.3 billion to $503.955 billion with this release….estimated unadjusted sales, extrapolated from a survey of a small sampling of retailers, indicated sales actually fell 0.7%, from $510,929 million in June to $507,575 million in July, while they were up 6.4% from the $476,983 million of sales in July a year ago…combined, the revisions to May and June indicate that 2nd quarter sales were roughly $2.25 billion lower than previously reported, which would subtract about $9.0 billion from the BEA’s calculation of 2nd quarter personal consumption expenditures at an annual rate before the inflation adjustment, which should be enough to reduce 2nd quarter GDP by 0.06 percentage points when the 2nd estimate is published at the end of the month…

Included below we have the table of the monthly and yearly percentage changes in retail sales by business type taken from the July Census pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance monthly estimates (now called “preliminary”) as revised in this report, likewise for each business type, with the May to June change under “May 18 (r)evised” and the revised June 2017 to June 2018 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance June sale estimates, before this month’s revision, is here…. 

July 2018 retail sales table

In computing the real personal consumption of goods data for national accounts from this July retail sales report, the BEA will use corresponding price changes from the July consumer price index, which we reviewed last week…since that report showed that the composite price index for all goods less food and energy goods was up 0.1% in July, we can thus figure that real retail sales excluding food and energy will on average be 0.1% lower than core retail sales shown above…however, the impact of price changes for different types of sales will vary considerably; for instance, while nominal sales at car dealers were up 0.2%, the price index for transportation commodities other than fuel was up 0.7%, as prices for new cars and trucks rose 0.3% and prices for used cars and trucks rose 1.3%…that means that real unit sales at auto dealers was actually on the order of 0.5% lower…for sales of goods for which prices fell, the impact will be the opposite; ie, while sales at clothing stores were 1.3% higher in July, the apparel price index was down 0.3%, meaning that real sales of clothing probably rose around 1.6%…in addition to those core sales, adjusting food and energy sales for price changes must be done separately; the CPI report showed that the food price index rose 0.1% in July, with the index for food purchased for use at home 0.2% higher, while prices for food bought for eating away from home were 0.1% higher, hence, with nominal sales at food and beverage stores up 0.6% in July. that 0.2% price increase means that real volume sales of food were up about 0.4%…likewise, the 1.3% nominal increase in sales at bars and restaurants would be adjusted to a real sales increase of about 1.2%…meanwhile, while sales at gas stations were up 0.8%, there was a 0.6% decrease in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 1.4%, with the caveat that gasoline stations do sell more than gasoline…averaging real sales computed thusly together, we’d estimate that income and outlays report for July will show that real personal consumption of goods rose 0.4% in July… the single month of that metric will account for 8% of 3rd quarter GDP…

Industrial Production Up 0.1% in July After Prior Months Manufacturing Revised Higher

The Fed’s G17 release on Industrial production and Capacity Utilization for July indicated that industrial production rose by 0.1% in July after rising by 1.0% in June but after falling 0.8% in May…however, after revisions, industrial production is now up 4.2% from a year ago, as compared to last month’s 3.8% year over year increase…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 108.0 in July from 107.9 in June, which was revised from the 107.7 reported for June a month ago…at the same time, the May reading for the IP index was revised up from 107.1 to 106.8, the April reading for the index was revised up 107.6 to 107.7, and the March index reading was revised from 106.4 to 106.5…

The manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.3% to 103.4 in July, after June’s manufacturing index was revised from 103.9 to 104.3, May’s manufacturing index was revised from 103.1 to 103.4, April’s manufacturing index was revised from 104.2 to 104.4, the March manufacturing index was revised up from 103.6 to 103.7, and the February manufacturing index was revised from 103.7 to 103.8…. meanwhile, the mining index, which includes oil and gas well drilling, slipped from 123.7 in June to 123.4 in July, which, after 5 consecutive months of strong growth, is still 12.9% higher than it was a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 0.5% to 104.5 in July, after the June utility index was revised from 106.2 to 105.0, the May index was revised from 107.8 to 105.7, and prior months were revised lower as well…nonetheless, the utility index still remains 2.3% above its year ago reading of 102.1..

This report also provides capacity utilization figures, which are 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 was unchanged at 78.1% in July, after capacity utilization for June was revised from 78.0% to 78.1%, and after capacity utilization for the prior 4 months was revised as well….capacity utilization by NAICS durable goods production facilities rose from 75.7 in June to 75.9 in July, as capacity utilization of motor vehicles and parts manufacturers rose from 78.6% to 79.3%, while capacity utilization for non-durables producers rose from 76.9% to 77.0% at the same time….on the other hand, capacity utilization for the mining sector fell to 92.0% in July from 92.8% in June, which was originally reported as 92.7%, while utilities were operating at 77.5% of capacity during July, down from their 78.0% of capacity during June, a figure that was originally reported at 78.9%…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….

New Housing Starts and Building Permits are Reportedly Higher in July

The July report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in July was at a seasonally adjusted annual rate of 1,168,000, which was 0.9 percent (±11.5 percent)* above the revised June estimated annual rate of 1,158,000 housing units started, but was 1.4 percent (±11.7 percent)* below last July’s pace of 1,185,000 housing starts annually…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, July’s housing starts could have been down by 10.6% or up by as much as 12.4% from those of June, with even larger revisions eventually possible…in this report, the annual rate for June housing starts was revised from the 1,173,000 reported last month to 1,158,000, while May starts, which were first reported at a 1,350,000 annual rate, were revised down from last month’s initial revised figure of 1,337,000 annually to an annual rate of 1,329,000 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 Census field agents, which estimated that 110,400 housing units were started in July, down from the 110,600 units started in June…of those housing units started in July, an estimated 81,800 were single family homes and 28,300 were units in structures with more than 5 units, down from the revised 83,900 single family starts in June, but up from the 25,800 units started in structures with more than 5 units in June…

As we’ve pointed out previously, 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 July, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,311,000 housing units per year, which was 1.5 percent (±1.3 percent) above the revised June annual rate of 1,292,000 permits, and was 4.2 percent (±1.7 percent) above the rate of building permit issuance in July a year earlier…the annual rate for housing permits issued in June was revised from 1,273,000 to 1,292,000 ….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 114,000 housing units were issued in July, down from the revised estimate of 121,600 new permits issued in June…the July permits included 77,600 permits for single family homes, down from 81,700 single family permits in June, and 33,500 permits for housing units in apartment buildings with 5 or more units, down from 36,600 such multifamily permits a month earlier… for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts at 1.168 Million Annual Rate in July and Comments on July Housing Starts… 

June Business Sales Up 0.3%, Business Inventories Up 0.1%, Lower than Estimated by the BEA

Following the release of the July retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for June(pdf), which incorporates the revised June retail data from that July retail report and the earlier published 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 $1,452.2 billion in June, up 0.3 percent (±0.1%) from May revised sales, and up 8.2 percent (±1.2 percent) from June sales of a year earlier…note that total May sales were revised from the originally reported $1,449.7 billion to $1,447.55 billion, now up 1.3% from April, rather than up 1.4% as had previously been reported….manufacturer’s sales were up 1.0% to $501,383 million in June, while retail trade sales, which exclude restaurant & bar sales from the revised June retail sales reported earlier, were statistically unchanged at $444,154 million, while wholesale sales fell 0.1% to $506,658 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,937.2 billion at the end of June, up 0.1 percent (±0.1%) from May, and 4.0 percent (±1.3%)* higher than in June a year earlier…the value of end of May inventories was revised down from the $1,936.9 billion reported last month to $1,935.563 billion…seasonally adjusted inventories of manufacturers were estimated to be valued at $669,270 million at the end of June, 0.1% higher than those at the end of May, inventories of retailers were valued at $635,510 million, 0.1% more than in May, while inventories of wholesalers were estimated to be valued at $632,402 million at the end of June, also up 0.1% from May…

The Key source data and assumptions that accompanied the release of the advance estimate of 2nd quarter GDP indicates that the BEA had assumed that total seasonally adjusted June manufacturing and trade inventories (on a Census basis) would increase by $1.5 billion from the previously published May figures…while this report shows that total June inventories increased by $1.6 billion, May inventories were revised down by about $1.3 billion at the same time…that means that the advance estimate of 2nd quarter GDP overestimated end of June inventories by about $1.2 billion…assuming there is no major change relating to the inflation adjustment on those inventories, a revision to reflect these new figures would be enough to subtract about 0.05 percentage points from 2nd quarter GDP, when the 2nd estimate is released at the end of August…

 

(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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