December’s jobs report; November’s trade deficit, construction spending, and factory inventories…

in addition to the Employment Situation Summary for December from the Bureau of Labor Statistics, this week also saw the release of three November reports from the Census Bureau that will input into 4th quarter GDP: the November report on our International Trade, the November report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for November….

privately issued reports released this week included the ADP Employment Report for December and the December report on light vehicle sales from Wards Automotive, which estimated that vehicles sold at a 17.76 million annual rate in December, up 2.3% from the 17.35 million annual pace of vehicle sales in November but down 2.9% from the 18.29 million vehicle rate in December of 2016…in addition, the week saw the release of both of the widely followed purchasing manager’s surveys from the Institute for Supply Management (ISM): the December Manufacturing Report On Business reported that the manufacturing PMI (Purchasing Managers Index) rose to 59.7% in December, up from 58.2% in November, which suggests a stronger expansion in manufacturing firms nationally, and the December Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) come in at 55.9%, down from 57.4% in November, indicating that a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in December than did in November…both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally…

Employers Add 148,000 Jobs in December, Unemployment Rate Remains at 4.1%

the Employment Situation Summary for December indicated weak job creation by employers, which was confirmed by equally weak employment figures from the household survey…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 148,000 jobs in December, after the previously estimated payroll job increase for November was revised up from 228,000 to 252,000, while the payroll jobs increase for October was revised down from 244,000 to 211,000…that means that this report represents a total of 139,000 more seasonally adjusted payroll jobs than were reported last month, below the average addition of 171,000 jobs per month we saw over the last year…the unadjusted data, however, shows that there were actually 180,000 less payroll jobs extent in December than in November, as normal seasonal layoffs in areas such as construction and recreational services were smoothed over by the seasonal adjustments..

the seasonally adjusted job changes table for December showed that retail sales was the only sector that saw relative job losses, as 20,300 fewer retail workers were added during the month than would be normal for December…on the other hand, employment in health care increased by 31,000 jobs for the month, as 12,400 more employees were added by hospitals…construction work also saw a relative job increase of 30,000, as specialty trade contractors added 23,800 more workers than normal in December, with 13,800 of those working on non-residential projects….another 29,000 seasonally adjusted jobs were added by the leisure and hospitality sector, with the addition of 25,100 jobs in bars and restaurants… 25,000 more jobs were added by manufacturers, with factories producing machinery accounting for 6,000 of those…however, the broad professional and business services sector, which usually leads in monthly job gains, only added 19,000 jobs, as there were 15,400 fewer accounting and bookkeeping jobs, while temporary help agencies only employed 7,000 more than in November… meanwhile, employment in other sectors including mining, wholesale trade, transportation and warehousing, financial activities, information, private education and government, all saw smaller job gains over the month..

with a number of the job increases in generally better paying sectors, the establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $26.63 an hour in December, after it had increased by a revised 5 cents an hour in November; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $22.30 an hour…employers also reported that the average workweek for all private payroll employees was unchanged at 34.5 hours in December, while hours for production and non-supervisory personnel was unchanged at 33.8 hours…at the same time, the manufacturing workweek decreased by 0.1 hour to 40.8 hours, while average factory overtime remained unchanged at 3.5 hours…

meanwhile, the December household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 104,000 to 154,021,000, while the estimated number of those unemployed fell by 40,000 to 6,576,000; which thus meant there was just a 64,000 increase in the total labor force…since the working age population had grown by 160,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 96,000 to a record high of 95,512,000…with the increase of those in the labor force proportionately smaller than the increase in the civilian noninstitutional population, the labor force participation rate remained unchanged at 62.7% in December….meanwhile, the increase in number employed as a percentage of the increase in the population was nearly stable and left the employment to population ratio, which we could think of as an employment rate, unchanged at 60.1%…at the same time, the decrease in the number unemployed was not large enough to lower the unemployment rate, which remained unchanged at 4.1%… meanwhile, the number of those who reported they were forced to accept just part time work rose by 64,000, from 4,851,000 in November to 4,915,000 in December, which was enough to increase the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 8.0% of the labor force in November to 8.1% in December…

like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there…note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page..

Deterioration of US Trade Deficit in November Will Hit 4th Quarter GDP

our trade deficit rose by 3.2% in November as the value of both our export and our imports increased, but our imports increased by more….the Census report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit rose by $1.6 billion to $50.5 billion in November, from an upwardly revised October deficit of $48.9 billion…the value of our November exports rose by $4.4 billion to $200.2 billion on a $4.4 billion increase to $134.6 billion in our exports of goods and an increase of less than $0.1 billion to $65.7 billion in our exports of services, while the value of our imports rose $6.0 billion to $250.7 billion on a $6.0 billion increase to $205.5 billion in our imports of goods and a decrease of less than $0.1 billion to $45.3 billion in our imports of services…export prices were on average 0.5% higher in November, so our real November exports would be smaller than the nominal value of them by that percentage, while import prices were 0.7% higher, meaning real imports were less than the nominal dollar values reported here by that percentage….

the $4.4 billion increase in our November exports of goods largely resulted from greater exports of capital goods, automotive vehicles and parts, and consumer goods…referencing the Full Release and Tables for November (pdf), in Exhibit 7 we find that our exports of capital goods rose by $2,473 million to $46,325 million on a $1,172 million increase in our exports of civilian aircraft, a $440 million increase in our exports of telecommunications equipment, and a $285 million increase in our exports of industrial machines other than those listed, and that our exports of automotive vehicles, parts, and engines rose by $963 million to $13,533 million on a $561 million increase in our exports of new and used passenger cars and a $416 million increase in our exports of vehicle accessories other than bodies, engines and tires, and that our exports of consumer goods rose by $662 million to $16,993 million on a $327 million increase in our exports of cellphones and a $262 million increase in our exports of art, antiques and other collectibles…in addition, our exports of industrial supplies and materials rose by $240 million to $41,230 million as a $631 million increase in our exports of petroleum products other than fuel oil, a $281 million increase in our exports of nonferrous metals other than copper and aluminum, and a $225 million increase in our exports of organic chemicals was partially offset by a $333 million decrease in our exports of fuel oil and a $449 million decrease in our exports of nonmonetary gold…meanwhile, our exports of foods, feeds and beverages rose by $112 million to $10,668 million…slightly offsetting the increases in those export categories, our exports of other goods not categorized by end use fell by $157 million to $5,279 million….

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of consumer goods, industrial supplies and materials and capital goods accounted for the November increase in our imports…our imports of consumer goods rose by $2,394 million to $52,406 million on a $1069 million increase in our imports of cellphones, a $360 million increase in our imports of artwork, antiques and other collectibles, a $383 million increase in our imports of gem diamonds, a $252 million increase in our cotton apparel and household goods and a $246 million increase in our imports of household appliances…our imports of industrial supplies and materials rose by $2,176 million to $45,001 million as our imports of crude oil rose by $1,137 million, our imports of fuel oil rose by $258 million and our imports of organic chemicals rose by $240 million….our imports of capital goods rose by $1,584 million to $56,513 million on a $767 million increase in our imports of semiconductors, a $578 million increase in our imports of telecommunications equipment, and a $381 million increase in our imports of computer accessories…in addition, our imports of automotive vehicles, parts and engines rose by $357 million to $29,913 million as imports of passenger cars, engines, and other parts all saw modest increases….offsetting those import increases, our imports of foods, feeds, and beverages fell by $105 million to $11,694 million, and our imports of other goods not categorized by end use rose by $371 million to $8,495 million….

the press release gives us details on our balance of trade with selected countries:

The November figures show surpluses, in billions of dollars, with Hong Kong ($2.8), South and Central America ($2.6), Singapore ($1.0), United Kingdom ($0.4), and Brazil ($0.3). Deficits were recorded, in billions of dollars, with China ($33.5), European Union ($13.5), Mexico ($5.8), Japan ($5.8), Germany ($5.3), Italy ($2.8), India ($2.4), South Korea ($1.7), OPEC ($1.3), France ($1.3), Canada ($1.1), Taiwan ($0.9), and Saudi Arabia ($0.2). 
* The deficit with the European Union increased $1.5 billion to $13.5 billion in November. Exports decreased $1.0 billion to $24.0 billion and imports increased $0.5 billion to $37.5 billion. 
* The deficit with South Korea decreased $1.0 billion to $1.7 billion in November. Exports increased $0.3 billion to $4.0 billion and imports decreased $0.7 billion to $5.7 billion.
* The deficit with China increased $1.5 billion to $33.5 billion in November. Exports increased $0.2 billion to $10.8 billion and imports increased $1.8 billion to $44.2 billion.

to gauge the impact of October and November goods trade on 4th quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the only difference being that they are not annualized here…..from that table, we can estimate that 3rd quarter real exports of goods averaged 125,674.3 million monthly in 2009 dollars, while similarly inflation adjusted October and November exports were at 125,453 million and 128,580 million respectively, in that same 2009 dollar quantity index representation…. annualizing the change between the average real exports of the two quarters, we find that the 4th quarter’s real exports of goods are rising at a 4.3% annual rate from those of the 3rd quarter, or at a pace that would add about 0.36 percentage points to 4th quarter GDP if continued at the same pace through December…..in a similar manner, we find that our 3rd quarter real imports averaged 187,706.3 million monthly in chained 2009 dollars, while inflation adjusted October and November imports were at 191,065 million and 195,257 million in 2009 dollars respectively…that would indicate that so far in the 4th quarter, real imports have been growing at annual rate of more than 12.1% from those of the 3rd quarter…since imports subtract from GDP because they represent the portion of the consumption and investment components of GDP that occurred during the quarter that was not produced domestically, their increase at a 12.1% rate would in turn subtract about 1.49 percentage points from 4th quarter GDP….hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our worsening balance of trade in goods would subtract about 1.13  percentage points from the growth of 4th quarter GDP….(note that we have not computed the impact on GDP of the usually less volatile change in services here, mostly because the Census does not provide inflation adjusted data on those, and we don’t have easy source of all their price changes..)

Construction Spending Rose 0.8% in November After Prior Months Were Revised Higher

the Census Bureau’s report on construction spending for November (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $1,257.0 billion annually if extrapolated over an entire year, which was 0.8 percent (±1.8%)* above the revised October annualized estimate of $1,247.1 billion and also 2.4 percent (±1.5 percent) above the estimated annualized level of construction spending in November of last year…the annualized October construction spending estimate was revised 0.5% higher, from $1,241.5 billion to $1,247.1 billion, while the annual rate of construction spending for September was revised nearly 1.0% higher, from $1,224.6 billion to $1,236.3 billion…the $11.7 billion upward revision to September construction spending would imply that the 3rd estimate of 4th quarter GDP was understated by as much as 0.29 percentage points, a change which will not be applied to published GDP figures until the annual revision is released in the middle of next summer…

a brief summary on the November changes for different types of construction spending is included with the Census release: Spending on private construction was at a seasonally adjusted annual rate of $964.3 billion, 1.0 percent (± 1.0 percent)* above the revised October estimate of $955.1 billion. Residential construction was at a seasonally adjusted annual rate of $530.8 billion in November, 1.0 percent (±1.3 percent)* above the revised October estimate of $525.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $433.5 billion in November, 0.9 percent (± 1.0 percent)* above the revised October estimate of $429.7 billion.  In November, the estimated seasonally adjusted annual rate of public construction spending was $292.7 billion, 0.2 percent (±2.0 percent)* above the revised October estimate of $292.0 billion. Educational construction was at a seasonally adjusted annual rate of $78.8 billion, 3.8 percent (±2.5 percent) above the revised October estimate of $75.9 billion. Highway construction was at a seasonally adjusted annual rate of $88.0 billion, 0.8 percent (±4.6 percent)* below the revised October estimate of $88.7 billion.

as you can tell from that summary, construction spending would be included in 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and in government investment outlays, for both state and local and Federal governments…however, getting an accurate read on the impact of November spending reported in this release on 4th quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price… there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for the prices changes of all of those types of construction separately, we’ve opted to use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment and thereby get a rough estimate of the real change…

that index showed that aggregate construction costs were down 0.2% in November after being up 0.5% in October, up 0.2% in September and up 0.1% in August…on that basis, we can estimate that construction costs for November were up 0.3% from September, up 0.5% from August, and up 0.6% from July, while they were obviously down 0.2% from October…we then use those percentages to inflate the lower cost spending figures for each of those 3rd quarter months, which is arithmetically the same as adjusting higher priced October and November construction spending downward, for purposes of comparison…annualized construction spending in millions of dollars for the third quarter months is given as $1,236,278 for September, $1,220,897 for August, and $1,215,351 for July, while it was at 1,247,077 annually in October and 1,256,993 annually in November…thus to compare the inflation adjusted construction spending of the two recent 4th quarter months to those of the third quarter, our calculation would be ((1,256,993 + 0.998 * 1,247,077 ) / 2)/ ((1,236,278 * 1.003 + 1,220,897 * 1.006 + 1,215,351 * 1.006) /3) = 1.0166659, meaning real construction over the months of October and November was up 1.6666% vis a vis the 3rd quarter…in GDP terms, that means real construction for the 4th quarter increased at an annual rate 6.835% over that of the 3rd quarter, or at a pace that would add about 0.50 percentage points to 4th quarter GDP, should real December construction continue at the same pace as that of October and November…

November Factory Shipments Up 1.2%, Inventories 0.4% Higher

the Census Bureau’s summary of the Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for November, which precedes the detailed spreadsheet, is quite complete, so we’ll just quote directly from it here:

  • New orders for manufactured goods in November, up five of the last six months, increased $6.5 billion or 1.3 percent to $488.1 billion, the U.S. Census Bureau reported today. This followed a 0.4 percent October increase. Shipments, up eleven of the last twelve months, increased $5.7 billion or 1.2 percent to $491.2 billion. This followed a 0.8 percent October increase. Unfilled orders, up three consecutive months, increased $1.2 billion or 0.1 percent to $1,137.1 billion. This followed a 0.1 percent October increase. The unfilled orders-to-shipments ratio was 6.60, down from 6.68 in October. Inventories, up twelve of the last thirteen months, increased $2.5 billion or 0.4 percent to $665.1 billion. This followed a 0.3 percent October increase. The inventories-to-shipments ratio was 1.35, down from 1.36 in October. 
  • New orders for manufactured durable goods in November, up three of the last four months, increased $3.0 billion or 1.3 percent to $241.4 billion, unchanged from the previously published increase. This followed a 0.4 percent October decrease. Transportation equipment, also up three of the last four months, drove the increase, $3.2 billion or 4.1 percent to $80.8 billion. New orders for manufactured nondurable goods increased $3.4 billion or 1.4 percent to $246.7 billion.
  • Shipments of manufactured durable goods in November, up six of the last seven months, increased $2.3 billion or 0.9 percent to $244.4 billion, down from the previously published 1.0 percent increase. This followed a 0.5 percent October increase. Transportation equipment, up two of the last three months, led the increase, $2.0 billion or 2.6 percent to $81.3 billion. Shipments of manufactured nondurable goods, up seven of the last eight months, increased $3.4 billion or 1.4 percent to $246.7 billion. This followed a 1.1 percent October increase. Petroleum and coal products, up five consecutive months, led the increase, $2.8 billion or 6.0 percent to $49.6 billion. 
  • Unfilled orders for manufactured durable goods in November, up three consecutive months, increased $1.2 billion or 0.1 percent to $1,137.1 billion, unchanged from the previously published increase. This followed a 0.1 percent October increase. Fabricated metal products, up ten of the last eleven months, led the increase, $0.5 billion or 0.6 percent to $81.3 billion. Inventories Inventories of manufactured durable goods in November, up sixteen of the last seventeen months, increased $0.9 billion or 0.2 percent to $405.3 billion, unchanged from the previously published increase. This followed a 0.2 percent October increase. Primary metals, also up sixteen of the last seventeen months, led the increase, $0.3 billion or 0.8 percent to $34.4 billion.
  • Inventories of manufactured nondurable goods, up six consecutive months, increased $1.6 billion or 0.6 percent to $259.8 billion. This followed a 0.6 percent October increase. Petroleum and coal products, up five consecutive months, led the increase, $1.1 billion or 2.7 percent to $40.0 billion.

to gauge the impact of November factory inventories on 4th quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the value of finished goods inventories was statistically unchanged at $229,475 million; the value of work in process inventories was 0.8% higher at $208,501 million, and materials and supplies inventories were valued 0.5% higher at $227,145 million…the producer price index for November indicated that prices for finished goods increased 1.0%, prices for intermediate processed goods were 0.5% higher, and that prices for unprocessed goods were on average 3.2% higher….assuming similar valuations for like inventories, that would suggest that November’s real finished goods inventories were down 1.0%, while real inventories of intermediate processed goods were 0.3% greater, and while real raw material inventories were 2.7% smaller…those changes follow an October report that indicated finished goods inventories were little changed, while real inventories of intermediate processed goods were 0.4% smaller, and real raw material inventory inventories were 0.4% smaller…since real factory inventories in the 3rd quarter were somewhat higher, any real inventory decreases in the 4th quarter will subtract from the growth of 4th quarter GDP… 

 

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

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tables and graphics for January 6th

rig count summary:

January 5th 2018 rig count summary

natural gas prices:

January 6 2018 natural gas prices

natural gas supplies:

January 5 2018 natural gas supplies as of December 29th

crude oil supplies:

January 6 2018 crude oil supplies as of December 29

refinery throughput:

January 4 2018 refinery throughput for December 29

oil exports:

January 6th 2017 crude exports as of December 29

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oil ends 2017 above $60, first time in 30 months; US refining at wintertime high, distillates production at a record high

oil prices rose for the 2nd week in a row this week and ended at their highest level of the year, closing above $60 a barrel for the first time since June of 2015…after being little changed in light overseas trading through the Christmas weekend, US crude oil prices for February delivery surged $1.50 to close at a 2-1/2-year high of $59.97 a barrel on Tuesday, on news that an explosion on a major Libyan oil pipeline had disrupted the country’s crude supply…prices then eased back 33 cents on Wednesday to close at $59.64 a barrel after the head of the Libyan state oil firm told Reuters the pipeline repair could take a week but would not have a major impact on exports, and on news that the cracked North Sea Forties pipeline was gradually resuming operations…oil prices then see-sawed on Thursday and ended 20 cents higher at $59.84 a barrel after the weekly EIA report showed a continuation of the ongoing decline in US oil supplies…US crude prices then rose 58 cents to close at $60.42 a barrel on Friday, 41% higher than its lowest point earlier this year, as oil traders interpreted a decline in US crude production and the weekly rig count to mean that producers were being cautious about ramping up their output…prices thus ended the week 12.5% higher than at the end of 2016, and up 132% from their low in February 2016

since oil prices are at a two and a half year high and appear to have clearly broken out of the trading range they’ve been in for the past year and a half, we’ll next include a graph of that price history so we can see how this price rally has developed..

December 30 2017 oil price history

the above graph is a screenshot of the live interactive oil price graph at Daily FX, an online platform that provides trading news, charts, indicators and analysis of the markets…each bar on the above graph represents oil prices for one week of oil trading between May 2011 and December 29th of this year, wherein green bars represent the weeks when the price of oil went up, and red bars represent the weeks when the price of oil went down…for green bars, the starting oil price at the beginning of the week is at the bottom of the bar and the price at the end of the week is at the top of the bar, while for red or down weeks, the starting price is at the top of the bar and the price at the end of the week is at the bottom of the bar…barely visible in this compressed view, there are also feint grey “wicks” above and below each bar to indicate trading prices during each week that were above or below the opening to closing price range for that week…

on this graph, we can see how oil prices stayed in a range roughly between $80 and $110 a barrel from mid-2011 till the fall of 2014, a period that saw widespread drilling and fracking helter-skelter across the breadth of the US…oil prices had already slipped to $78 a barrel the week before the Thanksgiving 2014 OPEC meeting that declared war on US fracking, after which oil prices quickly fell to $65 a barrel, and then continued lower, albeit with some intervening price rallies, until bottoming out at $26.02 a barrel on February 11, 2016, before spiking back up to $29 a barrel a day later (look closely at the graph, and you can see the ‘wick’ for that price dip at the bottom of the red candlestick for that week)…oil prices climbed to $50 a barrel pretty quickly after that, and generally stayed in a range between $44 a barrel and $54 a barrel from the Spring of 2016 through the Autumn of this year, a price range which kept the frackers confined to the most profitable sweet spots in the most productive oil fields…with prices now trending higher, we would expect to see a gradual expansion by exploration and exploitation enterprises into areas of the US that have seen little activity over the past few years…

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, covering details for the week ending December 22nd, showed that despite an increase in our oil imports and a decrease in our oil exports, we once again had to pull quite a bit of oil out of storage, mostly because US refineries were running at a record pace for this time of year…our imports of crude oil rose by an average of 159,000 barrels per day to an average of 7,993,000 barrels per day during the week, while our exports of crude oil fell by an average of 648,000 barrels per day to an average of 1,210,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 6,783,000 barrels of per day during the week, 807,000 barrels per day more than the net imports of the prior week…at the same time, field production of crude oil from US wells fell by 35,000 barrels per day to 9,754,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 16,537,000 barrels per day during the reporting week…

during the same week, US oil refineries were using 17,398,000 barrels of crude per day, 335,000 barrels per day more than they used during the prior week, while at the same time 644,000 barrels of oil per day were being withdrawn from oil storage facilities in the US….hence, this week’s crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was still 217,000 fewer barrels per day than what refineries reported they used during the week…to account for that disparity, the EIA needed to insert a (+217,000) 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, a fudge factor that is labeled in their footnotes as “unaccounted for crude oil”…

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports rose to an average of 7,598,000 barrels per day, still 5.9% less than the 8,075,000 barrels per day average imported over the same four-week period last year….the 644,000 barrel per day decrease in our total crude inventories came about on a 658,000 barrel per day withdrawal from our commercial stocks of crude oil, which was slightly offset by a 14,000 barrel per day addition of oil to our Strategic Petroleum Reserve, likely a return of oil that was borrowed from the Reserve during the post Hurricane Harvey emergency… this week’s 35,000 barrel per day decrease in our crude oil production was due to a 24,000 barrel per day decrease in output from wells in the lower 48 states, and an 11,000 barrels per day decrease in output from Alaska….the 9,754,000 barrels of crude per day that were produced by US wells during the week ending December 22nd was still 11.2% more than the 8,770,000 barrels per day we were producing at the end of 2016, and 15.7% above the recent low of 8,428,000 barrels per day that our oil production fell to during the last week of June, 2016…

US oil refineries were operating at 95.7% of their capacity in using those 17,398,000 barrels of crude per day, up from 94.1% of capacity the prior week, and the highest capacity utilization on record for any week in December since 1998….the 17,398,000 barrels of oil that were refined this week was only 1.8% less than the record 17,725,000 barrels per day that were being refined at the end of August of this year, and was 5.1% more than the 16,557,000 barrels of crude per day that were being processed during week ending December 23rd, 2016, when refineries were operating at 91.0% of capacity, and roughly 12.5% above the 10-year seasonal average for this time of the year… 

we’ll include a graph of what that refinery throughput looks like, since it’s so far above the norm, and almost a record at a out of season time of year..

December 20 2017 refinery throughput as of December 15

the above graph came from the package of oil graphs that John Kemp, senior energy analyst and columnist with Reuters, emailed out last week…this graph 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 in the 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 2016 traced weekly by a yellow line, with our year to date oil refining for 2017 represented by the red graph…since John was on vacation this week, i’ve taken the liberty of adding this week’s refinery spike to his graph of the prior week, so you can see how far above last year’s record level this week’s refining has been…in fact, you can also see that this year’s oil refining has been beating what were the record or near record levels of last year by a large margin since the beginning of April, except for during the disruptions to refining resulting from this year’s hurricanes, setting several record highs on the way…

with the big increase in the amount of oil being refined, gasoline output from our refineries was likewise higher, increasing by 181,000 barrels per day to 10,246,000 barrels per day during the week ending December 22nd, after slipping during the prior week despite increased refining....however, even with this week’s increase, our gasoline production was still 2.8% lower than the record 10,537,000 barrels of gasoline that were being produced daily during the week ending December 23rd of last year….however, our refineries’ production of distillate fuels (diesel fuel and heat oil) rose by 270,000 barrels per day at the same time to a record high of 5,476,000 barrels per day, which was also 10.5% more than the 4,957,000 barrels of distillates per day that were being produced during the the same week a year ago….  

with the increase in our gasoline production, our gasoline inventories at the end of the week rose by 591,000 barrels to 228,374,000 barrels by December 22nd, their seventh increase in a row…that was as our domestic consumption of gasoline increased by 59,000 barrels per day to 9,485,000 barrels per day, and as our exports of gasoline rose by 58,000 barrels per day to 862,000 barrels per day, while our imports of gasoline fell by 99,000 barrels per day to 388,000 barrels per day….however, with significant gasoline supply withdrawals throughout the summer months, our gasoline inventories are still down by 5.8% from their pre-summer high of 242,444,000 barrels, even as they are up fractionally from last December 23rd’s level of 227,143,000 barrels, and roughly 4.4% above the 10 year average of gasoline supplies for this time of the year…     

meanwhile, with our distillates production at a record level, our supplies of distillate fuels rose by 1,090,000 barrels to 129,935,000 barrels over the week ending December 22nd, in just the sixth increase in distillates supply in seventeen weeks…that was even as the amount of distillates supplied to US markets, a proxy for our domestic consumption, rose by 400,000 barrels per day to 4,326,000 barrels per day, and as our imports of distillates fell by 141,000 barrels per day 239,000 barrels per day, while our exports of distillates fell by 317,000 barrels per day to 4,326,000 barrels per day…even after this week’s inventory increase, however, our distillate supplies were still 14.3% lower at the end of the week than the 151,634,000 barrels that we had stored on December 23rd, 2016, and roughly 5.0% lower than the 10 year average of distillates stocks at this time of the year

finally, with US refineries using oil at a record pace, our commercial crude oil inventories fell for the 31st time in the past 38 weeks, decreasing by 4,609,000 barrels, from 436,491,000 barrels on December 15th to a 26 month low of 431,882,000 barrels on December 22nd ….while our oil inventories as of December 22nd were thus 11.1% below the 486,063,000 barrels of oil we had stored on December 23rd of 2016, and 5.1% lower than the 455,106,000 barrels of oil that we had in storage on December 25th of 2015, they were still 22.4% greater than the 352,979,000 barrels of oil we had in storage on December 26th of 2014, when the buildup to an oil glut in the US was just getting started… 

This Week’s Rig Count

US drilling activity decreased for the second time in 8 weeks during the week ending December 29th, but all the changes over the past 4 weeks have really been insignificant….Baker Hughes reported that the total count of active rotary rigs running in the US fell by 2 rig to 929 rigs in the week ending on Friday, which was still 271 more rigs than the 658 rigs that were deployed as of the December 30th report in 2016, while it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014….

the number of rigs drilling for oil was unchanged at 747 rigs this week, which was still 222 more oil rigs than were running a year ago, while the week’s oil rig count remained far 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 2 rigs to 182 rigs this week, which was still only 50 more gas rigs than the 132 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008…

with the shutdown of a drilling platform offshore from Texas, drilling activity in the Gulf of Mexico was was down by 1 rig to 18 rigs this week, which was also down from the 22 rigs that were drilling from platforms in the Gulf of Mexico a year ago…the total national offshore count was also down 1 rig at 18 rigs this week, but a year ago there was also a rig drilling offshore from Alaska, for a national total of 23 offshore rigs that were working last December 30th…

this week’s count of active horizontal drilling rigs was down by 5 rigs to 796 horizontal rigs this week, but it was still up by 264 rigs from the 532 horizontal rigs that were in use in the US at the end of last year, but of course was down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…meanwhile, the vertical rig count was up by 1 rig to 65 vertical rigs this week, but that was still down from the 70 vertical rigs that were working during the same week last year….in addition, the directional rig count was up by 2 rigs to 68 rigs this week, which was also up from the 56 directional rigs that were deployed on December 30th of 2016…

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 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 December 29th, the second column shows the change in the number of working rigs between last week’s count (December 22nd) and this week’s (December 29th) count, the third column shows last week’s December 22nd active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 for the 30th of December, 2016…               

December 29 rig count summary

you’ll notice that despite the decrease of two rigs targeting natural gas nationally, there was still a rig added in Ohio’s Utica shale; at the same time, gas rigs were pulled out of the Haynesville in Texas at the Louisiana border, and out of two ‘other’ gas fields not named in Baker Hughes summaries…otherwise, the few changes you see on the tables above seem to be the extent of this week’s changes, as it seems even most decisions in the oil fields were put on hold during the holiday week…

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a light holiday schedule of economic releases

with the usual month end reports all released last week, the only widely watched report released this week was the Case-Shiller Home Price Index for October from S&P Case-Shiller, which doesn’t even include homes prices, but just a index generated by averaging relative home sales prices from repeat home sales that closed in August, September and October as compared to sales prices from prior 3 month periods going back to January 2000…Case Shiller reported that home prices nationally for the 3 cited months averaged 6.2% higher than prices for the same homes that sold during the same 3 month period a year earlier, while their popular 20 city index saw a 6.4% year over year increase….in addition to that report, the Census released the Advance Economic Indicators report for November, a relatively new report intended to help the BEA estimate trade and inventory figures for the GDP reports, which in this month’s case has already been published….preliminary estimates from that advance report, which are presented as a table without much detail, showed that our November goods trade deficit rose to $69.68 billion, following a revised $68.1 billion deficit in October, while the value of wholesale inventories for November rose 0.7 percent from October to $610.2 billion in November, and the value of retail inventories rose 0.1% to $619.1 billion…the full international trade report will be released this coming week, while the wholesale sales and inventory and retail sales reports will follow in the weeks later…

this week also saw the release of the last two regional Fed manufacturing indices for December; 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 fell to +20 in December from +30 in November, still suggesting a strong expansion of that region’s manufacturing, while the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +29.7 from last month’s +19.4, indicating a robust expansion of the Texas manufacturing economy…

 

 

(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 from the aforementioned GGO posts, contact me…)   

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graphs and tables for December 30

rig count summary:

December 29 rig count summary

oil prices:

December 30 2017 oil price history

refinery throughput:

December 20 2017 refinery throughput as of December 15

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US oil, products exports rising again as international markets command premium prices

after slipping a bit on Monday, oil prices moved steadily higher the rest of the week and approached a two and a half year high in closing up for the first time in four weeks….after initially trading as high as $57.78 a barrel on Monday, US light sweet crude for January delivery fell 14 cents for the day to end at $57.16 a barrel, as the EIA forecast that US crude production from shale would grow by 94,000 barrels a day during January, negating upward price pressure from the North Sea pipeline outage and a Nigerian oil worker’s strike that drove international oil prices 18 cents higher…with international prices up 59 cents on Tuesday on the cutoff of North Sea supplies, US oil prices also rose, with the expiring January WTI contract closing 30 cents higher at $57.46 a barrel on bullish overseas news and expectations that US crude stockpiles data would show a fourth consecutive large weekly drawdown of US crude supplies…now trading oil contracts for February, which had closed Tuesday up 34 cents to $57.56 a barrel, that front month US crude price rose 53 cents to close at $58.09 a barrel on Wednesday, after the EIA data indicated an even larger-than-expected drop in US crude oil inventories…U.S. crude futures for February then rose for a third straight day on Thursday to settle up 27 cents at $58.36 a barrel, their second highest level of the year, on a follow-thru on the previous day’s news of falling crude inventoriesUS crude prices then tacked on another 11 cents in thin pre-holiday trading on Friday, on a promise from Russian Energy Minister Alexander Novak that OPEC and Russia would exit their output cuts smoothly to avoid creating any new oil surplus, closing the week with a 2% gain at $58.47 a barrel, the highest weekly close since November 24th and the second highest close since June 22nd, 2015…

at the same time, international oil prices, as represented by trading in February contracts for North Sea Brent crude, were up every day during the past week, rising over $2 or 3.2% during the week to close to $65.25 a barrel, its highest price in more than two years…that means the premium of international oil prices over US prices is again approaching 12%, a premium that encouraged weeks of record high US oil exports just two months ago…in like manner, premiums for LNG in Asia and Europe saw a record spread over the benchmark price for US natural gas as set at the Henry Hub in Louisiana this week…with the price of LNG delivered to Japan, Korea and Malaysia averaging $10.85 per mmBTU early this week, LNG delivered to northeast Asia was $8.11 per mmBTU higher than the US price, while the UK’s natural gas price climbed to as high as $8.83 per mmBTU over the US price…with US natural gas for January delivery hitting a cycle low of $2.598 per mmBTU on Thursday before closing the week at  $2.667 per mmBTU, US natural gas suppliers could be in a position to triple what they get from domestic natural gas customers, even after paying for liquefaction and transportation costs, if they could export larger quantities of that gas today…with the weekly Natural Gas Storage Report from the EIA indicating that US natural gas supplies are now 5% below their level of the same week of a year ago, our domestic stocks are not yet really threatened, but that will certainly be something to watch as the wave of new US LNG export capacity additions starts to come online in the 2nd half of next year..

The Latest US Oil Data from the EIA

this week’s US oil data from the US Energy Information Administration, covering details for the week ending December 15th, showed that our oil exports jumped back to near record levels while our refineries ran at an above normal pace for this time of year, which meant we again had to pull quite a bit of oil out of storage to meet those needs…our imports of crude oil rose by an average of 471,000 barrels per day to an average of 7,834,000 barrels per day during the week, while our exports of crude oil rose by an average of 772,000 barrels per day to average 1,858,000 barrels per day, which meant that our effective trade in oil worked out to a net import average of 5,976,000 barrels of per day during the week, 301,000 barrels per day less than the net imports of the prior week…at the same time, field production of crude oil from US wells rose by 9,000 barrels per day to another record high of 9,789,000 barrels per day, which means that our daily supply of oil from our net imports and from wells totaled an average of 15,765,000 barrels per day during the reporting week…  

during the same week, US oil refineries were using 17,063,000 barrels of crude per day, 111,000 barrels per day more than they used during the prior week, while at the same time 873,000 barrels of oil per day were being withdrawn from oil storage facilities in the US….hence, this week’s crude oil figures from the EIA seem to indicate that our total supply of oil from net imports, from oilfield production, and from storage was 425,000 fewer barrels per day than what refineries reported they used during the week…to account for that disparity, the EIA needed to insert a (+425,000) 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, a metric that is labeled in their footnotes as “unaccounted for crude oil”…

further details from the weekly Petroleum Status Report (pdf) show that the 4 week average of our oil imports slipped to an average of 7,432,000 barrels per day, 6.2% less than the 7,921,000 barrels per day average imported over the same four-week period last year….the 873,000 barrel per day decrease in our total crude inventories came about on a 928,000 barrel per day withdrawal from our commercial stocks of crude oil, which was slightly offset by a 55,000 barrel per day addition of oil to our Strategic Petroleum Reserve, likely a return of oil that was borrowed from the Reserve during the post Hurricane Harvey emergency…this week’s 9,000 barrel per day increase in our crude oil production came by way of a 15,000 barrel per day increase in output from wells in the lower 48 states, which was partially offset by a 6,000 barrels per day decrease in output from Alaska….the 9,789,000 barrels of crude per day that were produced by US wells during the week ending December 15th was yet another new record high for US output, 11.6% more than the 8,770,000 barrels per day we were producing at the end of 2016, and up 16.1% from the recent output nadir of 8,428,000 barrels per day produced during the last week of June 2016…

US oil refineries were operating at 94.1% of their capacity in using those 17,063,000 barrels of crude per day, up from 93.4% of capacity the prior week, and the highest capacity utilization on record for the 2nd week of December….the 17,063,000 barrels of oil that were refined this week were 3.7% less than the record 17,725,000 barrels per day that were being refined at the end of August, but 2.4% more than the 16,658,000 barrels of crude per day that were being processed during week ending December 16th, 2016, when refineries were operating at 91.5% of capacity, and 10.4% above the 10-year seasonal average for this time of the year… 

even with the increase in the amount of oil being refined, gasoline output from our refineries was slightly lower, as it decreased by 64,000 barrels per day to 10,065,000 barrels per day during the week ending December 15th, after rising last week on slower refining....that decrease meant our gasoline production was 0.8% lower than the 10,150,000 barrels of gasoline that were being produced daily during the week ending December 16th of last year…at the same time, our  refineries’ production of distillate fuels (diesel fuel and heat oil) fell by 41,000 barrels per day to 5,206,000 barrels per day….however, that was still 1.6% more than the 5,122,000 barrels per day of distillates that were being produced during the the same week a year ago….     

with the relatively small decrease in our gasoline production, our gasoline inventories at the end of the week rose by 1,237,000 barrels to 227,783,000 barrels by December 15th, their sixth increase in a row…that was despite an increase of 335,000 barrels to 9,426,000 barrels per day in our domestic consumption of gasoline, while our exports of gasoline also rose by 73,000 barrels per day to 804,000 barrels per day, and while our imports of gasoline inched up by 4,000 barrels per day to 487,000 barrels per day….however, with significant gasoline supply withdrawals in 15 out of the prior 21 weeks, our gasoline inventories are still down by 6.0% from their pre-summer high of 242,444,000 barrels, and down fractionally from last December 16th’s level of 228,736,000 barrels, even as they are roughly 4.1% above the 10 year average of gasoline supplies for this time of the year…    

meanwhile, with the small drop in our distillates production, our supplies of distillate fuels rose by 769,000 barrels to 128,845,000 barrels over the week ending December 15th, in just the fifth increase in distillates supply in sixteen weeks…that was as the amount of distillates supplied to US markets, a proxy for our domestic consumption, fell by 454,000 barrels per day to 3,926,000 barrels per day, even as our exports of distillates rose by 338,000 barrels per day to 1,550,000 barrels per day, while our imports of distillates rose by 4,000 barrels per day to a 33 week high of 149,000 barrels per day…even after this week’s increase, our distillate inventories were still 16.1% lower at the end of the week than the 153,515,000 barrels that we had stored on December 16th, 2016, and roughly 5.4% lower than the 10 year average of distillates stocks at this time of the year

finally, with the week’s increase in our oil exports and the increase in our refining, our commercial crude oil inventories fell for the 30th time in the past 37 weeks, decreasing by 6,495,000 barrels, from 442,986,000 barrels on December 8th to a 26 month low of 436,491,000 barrels on December 15th….while our oil inventories as of December 15th were thus 10.1% below the 485,449,000 barrels of oil we had stored on December 16th of 2016, and 3.5% lower than the 452,477,000 barrels of oil that we had in storage on December 18th of 2015, they were still 23.0% greater than the 354,733,000 barrels of oil we had in storage on December 19th of 2014, when the buildup to an oil glut in the US was just getting started… 

This Week’s Rig Count

US drilling activity increased for the sixth time in seven weeks but for just the 9th time out of the last 21 weeks during the week ending December 22nd, but just barely…Baker Hughes reported that the total count of active rotary rigs running in the US increased by 1 rig to 931 rigs in the week ending on Friday, which was also 278 more rigs than the 653 rigs that were deployed as of the December 23rd report in 2016, while it was still less than half of the recent high of 1929 drilling rigs that were in use on November 21st of 2014….

the number of rigs drilling for oil was unchanged at 747 rigs this week, which was still 224 more oil rigs that were running a year ago, while the week’s oil rig count remained far 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 rose by 1 rig to 184 rigs this week, which was still only 55 more gas rigs than the 129 natural gas rigs that were drilling a year ago, and way down from the recent high of 1,606 natural gas rigs that were deployed on August 29th, 2008…

drilling activity in the Gulf of Mexico was unchanged at 19 rigs this week, which was down from the 24 rigs that were drilling from platforms in the Gulf of Mexico a year ago…with no other offshore drilling elsewhere, the national offshore count was also at 19 rigs this week, but a year ago there was also a rig drilling offshore from Alaska, for a national total of 25 offshore rigs…

this week’s count of active horizontal drilling rigs was unchanged at 801 horizontal rigs this week, but it was still up by 275 rigs from the 526 horizontal rigs that were in use in the US on December 23rd of last year, but down from the record of 1372 horizontal rigs that were deployed on November 21st of 2014…meanwhile, the vertical rig count was up by 4 rigs to 64 vertical rigs this week, but that was still down from the 69 vertical rigs that were working during the same week last year….on the other hand, the directional rig count was down by 3 rigs to 66 rigs this week, which was still up from the 58 directional rigs that were deployed on December 23rd of 2016…

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 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 December 22nd, the second column shows the change in the number of working rigs between last week’s count (December 15th) and this week’s (December 22nd) count, the third column shows last week’s December 15th active rig count, the 4th column shows the change between the number of rigs running on Friday and the equivalent Friday 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 for the 23rd of December, 2016…              

December 22nd 2017 rig count summary

there appears to be a few unexplained disparities between the state rig counts from those in the major basins this week….first, note that the central Oklahoma Cana Woodford saw a 4 rig increase, despite the state count being down by a single rig…that would suggest that a net of 4 rigs drilling conventional wells were pulled out of the state, since the only other basin in Oklahoma to show a change was the Mississippian on the Kansas border….then, noting the 4 rig increase in New Mexico, it’s possible 3 of those were in the Permian, since the west Texas districts that include the Permian in that state were down by 2 rigs, while drilling in the Dallas area Barnett shale increased by two rigs…also note that all the basin count changes involve oil rigs; the single natural gas rig addition was in an “other” unnamed basin…and in addition to the changes in the major producing states shown above, Alabama also added a rig this week and now has two; that’s also the same number of rigs they had active as of December 23rd 2016…

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3rd quarter GDP revision, November income and outlays, durable goods, new home construction, new and existing home sales

in advance of the holidays, several of the reports that are normally released during the last week of the month were accelerated into this one…that means this week had the 3rd estimate of 3rd quarter GDP and the November report on Personal Income and Spending, both from the Bureau of Economic Analysis, the advance report on durable goods for November, the November report on New Residential Construction, and the November report on new home sales, all from the Census bureau, and the Existing Home Sales Report for November from the National Association of Realtors (NAR)…we also had the release of the Chicago Fed National Activity Index (CFNAI) for November, a weighted composite index of 85 different economic metrics, which fell to +0.15 in November from +0.76 in October, which was revised from the +0.65 that had been reported for October last month….however, the widely watched 3 month average of the CFNAI index still rose to +0.41 in November, up from a revised + 31 in October, which indicates that national economic activity continues at a pace above the historical trend over recent months….

in addition, the week also saw the release of the Philadelphia Fed Manufacturing Survey for December, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions increased from a reading of +22.7 in November to +26.2 in December, indicating a robust expansion of that the region’s manufacturing, and the Kansas City Fed manufacturing survey for December, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index slipped to +14 in December from +16 in November, still suggesting an ongoing expansion for that region’s manufacturing…

3rd Quarter GDP Revised to Indicate Growth at a 3.2% Rate

the Third Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services increased at a 3.2% annual  rate in the quarter, revised from the 3.3% growth rate reported in the second estimate last month, as personal consumption growth was revised lower than was previously reported and the change in our net trade was a smaller addition to GDP than in the 2nd estimate…in current dollars, our third quarter GDP grew at a 5.3% annual rate, revised down from the rounded 5.5% reported in the 2nd estimate, increasing from what would extrapolate to $19,250.0 billion annually in the 2nd quarter of this year to an annualized $19,500.6 billion in the 3rd quarter, with the headline 3.2% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.1%, aka the GDP deflator, was applied to the current dollar change…

as we review this month’s revisions, recall that the press release for the GDP reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts….for our purposes, all the data that we’ll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 3rd quarter GDP, which is linked to on the sidebar of 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 4th quarter of 2013; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components in the most recent quarters; table 4, which shows the change in the price indexes for each of those components; and table 5, which shows the quantity indexes for each of the GDP components, which are used to convert current dollar figures into units of output represented by chained dollar amounts…the pdf for the second estimate of the 3rd quarter, which this estimate revises, is here

growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 2.3% growth rate reported last month to a 2.2% rate in this 3rd estimate…that growth rate figure was arrived at by deflating the 3.7% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation at a 1.5% annual rate in the 3rd quarter, which was statistically unrevised from the PCE inflation rate reported a month ago…real personal consumption of durable goods grew at a 8.6% annual rate, which was revised from the 8.1% growth rate shown in the 2nd estimate, and added 0.97 percentage points to GDP, as an increase in real consumption of motor vehicles and parts at a 12.2% rate accounted for more than a third of the durables goods increase…real consumption of nondurable goods by individuals grew at a 2.3% annual rate, revised from the 2.0% rate reported in the 2nd estimate, and added 0.34 percentage points to the 3rd quarter economic growth rate, as slightly lower consumption of clothing and energy goods was more than offset by greater consumption of food and other non-durables….at the same time, consumption of services rose at a 1.1% annual rate, revised from the 1.5% growth rate reported last month, and added 0.52 percentage points to the final GDP tally, as real consumption of health care services rose at a 4.5% rate while real consumption of all other services averaged slightly lower…

meanwhile, seasonally adjusted real gross private domestic investment grew at a 7.3% annual rate in the 3rd quarter, on net unrevised from last month, as real private fixed investment grew at a 2.4% rate, also statistically the same as the second estimate, while inventory growth was slightly less than previously estimated…investment in non-residential structures was revised to show contraction at a 7.0% rate, worse than the 6.8% contraction rate previously reported, while real investment in equipment was revised from growth at a rate of 10.4% to growth at a 10.8% rate, and the quarter’s investment in intellectual property products was revised from growth at a 5.8% rate to growth at a 5.3% rate…on the other hand, real residential investment was shown to be shrinking at a 4.7% annual rate, rather than the 5.1% contraction rate previously reported…after those revisions, the decrease in investment in non-residential structures subtracted 0.21 percentage points from the 3rd quarter’s growth rate, the increase in investment in equipment added 0.58 percentage points to the quarter’s growth rate, lower residential investment subtracted 0.18 percentage points from GDP, while growth in investment in intellectual property added 0.21 percentage points to the growth rate of 3rd quarter GDP…

in addition, investment in real private inventories grew by an inflation adjusted $38.6 billion in the 3rd quarter, revised from the $39.0 billion of inventory growth last month…this came after inventories had grown at an inflation adjusted $5.5 billion rate in the 2nd quarter, and hence the $33.0 billion increase in real inventory growth added 0.79 percentage points to the quarter’s growth rate, revised from the 0.80 percentage point addition from inventory growth that was indicated in the second estimate….since growth in inventories indicates that more of the goods produced during the quarter were left in warehouses or “sitting on the shelf”, their increase by $33.0 billion meant that real final sales of GDP were relatively smaller by that much, and hence real final sales of GDP increased at a 2.4% rate in the 3rd quarter, down from the real final sales growth rate of 2.9% in the 2nd quarter, when the smaller increase in inventory growth meant that growth in real final sales was fairly close to real growth in GDP…

the previously reported increase in real exports was revised a bit lower with this estimate, while the previously reported decrease in real imports was was not as large as previously  estimated, and as a result the change in our net trade was a smaller addition to GDP rather than was previously reported…our real exports grew at a 2.1% rate rather than the 2.2% rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their growth added 0.25 percentage points to the 3rd quarter’s growth rate, down from the 0.27 percentage point addition shown in the previous report….meanwhile, the previously reported 1.1% decrease in our real imports was revised to a 0.7% decrease, and since imports are subtracted from GDP because they represent either consumption or investment that was not produced here, their decrease conversely added 0.11  percentage points to 3rd quarter GDP, rather than the 0.17 percentage point addition indicated by the larger contraction estimate last month….thus, our improving trade balance added a total of 0.36 percentage points to 3rd quarter GDP, rather than the (rounded) 0.43 percentage point addition that had been indicated by the second estimate…

finally, the entire government sector grew at a 0.7% rate, revised from the 0.4% rate previously reported, as federal government consumption and investment was unchanged from the second estimate, while real state & local government consumption and investment grew rather than shrinking as was previously reported…real federal government consumption and investment was seen to have grown at a 1.3% rate from the 2nd quarter in this estimate, unrevised from the second estimate, as real federal outlays for defense grew at a 2.4% rate and added 0.09 percentage points to 3rd quarter GDP, while all other federal consumption and investment shrunk at a 0.2% rate, revised from last month’s 0.3% contraction, and subtracted 0.01 percentage point from 3rd quarter GDP….meanwhile, real state and local consumption and investment grew at a 0.2% rate in the quarter, which was revised from the 0.1% contraction rate reported in the 2nd estimate, and added 0.03 percentage points to 3rd quarter GDP….note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services…

November Personal Income Up 0.3%; Personal Spending up 0.6%; PCE Price Index Up 0.2%

the November report on Personal Income and Outlays from the Bureau of Economic Analysis includes the month’s data for our personal consumption expenditures (PCE), which accounts for roughly 69% of the month’s GDP, and with it the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated…in addition, this release reports our personal income data, disposable personal income, which is income after taxes, and our monthly savings rate…however, because this report feeds in to GDP and other national accounts data, the dollar value change reported for each of those metrics is not the current monthly change; rather, they’re seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase for a year if November’s adjusted income and spending were extrapolated over an entire year…however, the percentage changes are computed monthly, from one month’s annualized figure to the next, and in this case of this month’s report they give us the percentage change in each annualized metric from October to November….

hence, when the opening line of the press release for this report tell us “Personal income increased $54.0 billion (0.3 percent) in November“, they mean that the annualized figure for seasonally adjusted personal income in , $16,629.1 billion, was $54.0 billion higher, or more than 0.3% higher than the annualized personal income figure of $16,575.1 billion extrapolated for October; the actual, unadjusted change in personal income from October to November is not given…at the same time, annualized disposable personal income, which is income after taxes, also rose by more than 0.3%, from an annual rate of $14,515.6 billion in October to an annual rate of $14,566.5 billion in November…these figures were arrived at after personal income for October was revised up from $16,574.6 billion annually and October’s disposable personal income was revised up from $14,513.3 billion annually….the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized…in November, the largest contributors to the $54.0 billion annual rate of increase in personal income were a $34.3 billion increase in wages and salaries and a $11.4 billion increase in dividend and interest income…

for the personal consumption expenditures (PCE) that we’re interested in, BEA reports that they increased at a $87.1 billion rate, or at a rate greater than 0.6%, as the annual rate of PCE rose from $13,548.7 billion in October to $13,635.8 billion in November….at the same time, October PCE was revised lower, from $13,557.4 billion annually to $13,548.7 billion….total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $91.7 billion to $14,140.3 billion annually in November, which left total personal savings, which is disposable personal income less total outlays, at a $426.2 billion annual rate in November, down from the revised $466.9 billion in annualized personal savings in October … as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to a post recession low of 2.9% in November, from the October savings rate of 3.2%…

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….the BEA does that by computing a price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, and which is included in Table 9 in the pdf for this report…that index rose from 113.242 in October to 113.504 in November, a month over month inflation rate that’s statistically 0.02314%, which BEA reports as a 0.2% increase, following the 0.1% PCE price index increase they reported for October…applying the actual November inflation adjustment to the nominal amount of spending left real PCE up 0.4% in November, after October’s real PCE was statistically unchanged…notice that when those price indexes are applied to a given month’s annualized PCE in current dollars, it yields that month’s annualized real PCE in those familiar chained 2009 dollars, which are the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….that result is shown in table 7 of the PDF, where we see that November’s chained dollar consumption total works out to 12,014.2 billion annually in 2009 dollars, 4.014% more than October’s 11,965.1 billion, a difference that the BEA rounds down and reports as +0.4%…

however, to estimate the impact of the change in PCE on the change in GDP,  the month over month changes don’t help us much, since GDP is reported quarterly…thus we have to compare October’s and November’s real PCE to the the real PCE of the 3 months of the third quarter….while this report shows PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 3rd quarter was represented by 11,916.6 billion in chained 2009 dollars…(ie, that’s the same as what’s shown in table 3 of the pdf for the revised 3rd quarter GDP report)….then, by averaging the annualized chained 2009 dollar figures for October and November, 11,965.1 billion and 12,014.2 billion, we get an equivalent annualized PCE for the two months of the 4th quarter that we have data for so far….when we compare that average of 11,989.65 to the 3rd quarter real PCE of 11,916.6, we find that 4th quarter real PCE has grown at a 2.47% annual rate for the two months of the 3rd quarter we have so far…(notice the math we used to get that annual growth rate: [ (((12,014.2 + 11,965.1) / 2) / 11,916.6) ^4 = 1.02474681 ]…that’s a pace that would add 1.71 percentage points to the GDP growth rate of the 4th quarter by itself, even if there is no improvement in December PCE from that average… 

November Durable Goods: New Orders up 1.3%, Shipments Up 1.0%, Inventories Up 0.2%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for November (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $3.1 billion or 1.3 percent to $241.4 billion in November, after October’s new orders were revised from the $236.0 billion reported last month to $238.3 billion, now down just 0.4% from September’s new orders…year to date new orders are now 5.4% above those of 2016, up from the +4.9% year over year change we saw in this report last month….a reversal of the volatile monthly new orders for transportation equipment was responsible for this month’s increase, as new transportation equipment orders rose $3.3 billion or 4.2 percent to $80.9 billion, on a 14.5% decrease to $12,513 million in new orders for commercial aircraft….excluding orders for transportation equipment, new orders actually fell 0.1%, while excluding just new orders for defense equipment, new orders rose 1.0%….at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, slipped by $56 million or less than 0.1% to $67,142 million…

meanwhile, the seasonally adjusted value of November shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for changes in prices, increased by $2.4 billion or 1.0 percent to $244.5 billion, after the value of October shipments was revised from from $241.0 billion to $242.1 billion, still up 0.5% from September…shipments of transportation equipment were up $2.1 billion or 2.6 percent to $81.3 billion on a 1.4% increase in shipments of motor vehicles and a 11.7% increase in shipments of commercial aircraft, while shipments of defense aircraft fell 1.7%…at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 16th time in the past 17 months, increasing by $0.9 billion or 0.2 percent to $405.2 billion, after October inventories were revised from $404.1 billion to $404.3 billion, up 0.2% from September…a $0.3 billion or 0.2 percent increase to $124.1 billion in inventories of transportation equipment were down 0.2% to $130,699 million, without which all other inventories were up 0.4%…

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, increased for the third month in a row, rising by $1.1 billion or 0.1 percent to $1,137.0 billion, following a statistically insignificant October increase…a $0.5 billion or 0.6 percent to $81.3 billion increase in unfilled orders for fabricated metal products was responsible for nearly half the increase, while unfilled transportation equipment orders were down 0.4% to $769,844 million…compared to a year earlier, the unfilled order book for durable goods is 0.7% higher than the level of last November, with unfilled orders for transportation equipment still 1.0% below their year ago level, largely on a 2.0% decrease in the backlog of orders for defense aircraft…  

November Report Shows New Housing Starts Up, Permits Down

the November report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,297,000 units during the month, which was 3.3 percent (±9.1 percent)* above the revised October estimated annual rate of 1,256,000 housing unit starts, and was 12.9 percent (±11.7) above last November’s rate of 1,149,000 housing starts a year…the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, with the figure in parenthesis the most likely range of the change indicated; in other words, November housing starts could have been down by 5.8% or up by as much as 12.4% from those of October, with even larger revisions possible…in this report, the annual rate for October housing starts was revised from the 1,290,000 reported last month to 1,256,000, while September starts, which were first reported at a 1,127,000 annual rate, were revised down from last month’s initial revised figure of 1,135,000 annually up to 1,159,000 annually with this report….

those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 98,400 housing units were started in November, down from the 109,000 units that were started in October…of those housing units started in November, an estimated 67,900 were single family homes and 29,800 were units in structures with more than 5 units, down from the revised 75,200 single family starts and the 32,300 units started in structures with more than 5 units in October…

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in November, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,298,000 housing units, which was 1.4 percent (±1.7 percent)* below the revised October rate of 1,316,000 permits, but was 3.4 percent (±2.3 percent) above the rate of building permit issuance in November a year earlier…the annual rate for housing permits issued in October was revised up from the originally reported 1,297,000….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for 95,600 housing units were issued in November, down from the revised estimate of 114,000 new permits issued in October…the November permits included 61,700 permits for single family homes, down from 70,900 single family permits issued in October, and 31,600 permits for housing units in apartment buildings with 5 or more units, down from 40,100 such multifamily permits a month earlier… for more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.297 Million Annual Rate in November and Comments on November Housing Starts

November New Home Sales Much Higher After Prior Months Revised Way Down

the Census report on New Residential Sales for November (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 733,000 homes annually, which was 17.5 percent (±10.4 percent) above the revised October rate of 624,000 new single family home sales a year and 26.6 percent (±16.6 percent) above the estimated annual rate that new homes were selling at in November of last year…the figures in parenthesis indicate the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….with this report; sales new single family homes in October were revised down from the annual rate of 685,000 reported last month to 624,000, while home sales in September, initially reported at an annual rate of 677,000 and revised to a 645,000 a year rate last month, were also revised lower to a 635,000 a year rate with this report, and while August’s annualized home sale rate, initially reported at an annual rate of 580,000 and revised from the initially revised 561,000 a year rate to a 565,000 a year rate last month, were further revised down to a 559,000 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 indicated that approximately 52,000 new single family homes sold in November, up from the estimated 49,000 new homes that sold in October and in September…..the raw numbers from Census field agents further estimated that the median sales price of new houses sold in November was $318,700, down from the median sale price of $319,600 in October but up from the median sales price of $315,000 in November a year ago, while the average November new home sales price was $377,100, down from the $394,700 average sales price in October, but up from the average sales price of $363,400 in November a year ago….a seasonally adjusted estimate of 283,000 new single family houses remained for sale at the end of November, which represents a 4.6 month supply at the November sales rate, down from the reported 4.9 months of new home supply in October…for graphs and additional commentary on this report, see the following  two posts by Bill McBride at Calculated Risk: New Home Sales increase to 733,000 Annual Rate in November and A few Comments on November New Home Sales

November Existing Home Sales Up 5.6% to Eleven Year High

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 5.6% from October to November, projecting that a post recession record 5.81 million existing homes would sell over an entire year if the November home sales pace were extrapolated over that year, a pace that was also 3.8% above the annual sales rate they projected in November of a year ago…October sales, now shown at a 5.50 million annual rate, were revised up from the 5.48 million annual rate indicated by last month’s report…the NAR also reported that the median sales price for all existing-home types was $248,000 in November, up from from the $247,000 reported in October and 5.8% higher than in November a year earlier, which they report as “the 69th consecutive month of year-over-year gains”…..the NAR press release, which is titled “Existing-Home Sales Soar 5.6 Percent in November to Strongest Pace in Over a Decade“, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release…as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation of the actual number of homes that sold each month…this unadjusted data indicates that roughly 427,000 homes sold in November, down by 6.8% from the 458,000 homes that sold in October, but up by 2.2% from the 418,000 homes that sold in November of last year, so we can see that it was a seasonal adjustment that caused the annualized published figures to indicate a month over month increase and a record high….that same pdf indicates that the median home selling price for all housing types rose 0.8%, from a revised $246,000 in October to $248,000 in November, while the average home sales price was $289,900, also up 0.8% from the $287,600 average sales price in October, and up 4.8% from the $276,600 average home sales price of November a year ago…for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: “Existing-Home Sales Soar 5.6 Percent in November” and A Few Comments on November Existing Home Sales

 

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

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