the key release of this past week was the Census report on our International Trade for February, which gives us data on our exports and imports and hence a clarification of the actual growth in other sectors of the domestic economy...in addition, we also saw two reports that give us two thirds of the inventory data for the first two months of the year: the Full Report on Manufacturers' Shipments, Inventories and Orders for February and the February report on Wholesale Trade, Sales and Inventories (pdf), both from the Census bureau....the week also saw the release of the Job Openings and Labor Turnover Survey (JOLTS) for February by the Bureau of Labor Statistics, and the Consumer Credit Report for February from the Fed, which showed that overall credit expanded by a seasonally adjusted $17.3 billion, or at a 5.8% annual rate, as non-revolving credit expanded at a 6.6% rate to $2,627.0 billion and revolving credit outstanding grew at a 3.7% rate to $940.6 billion.....the week also saw the private release of the Mortgage Monitor for February (pdf) from Black Knight Financial Services, which we'll be posting on a bit later, and the March Non-Manufacturing Report On Business from the Institute of Supply Management; which saw their NMI (non-manufacturing index) rise to 54.5%, up from 53.4% in January, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business...
Trade Deficit up 2.6% in February, on Track to Subtract 0.65 Percentage Points from 1st Quarter GDP
our trade deficit rose by 2.6% February, as the net value of both our exports and our imports increased, but our imports increased by more....the Census report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit rose by $1.2 billion to $47.1 billion in February from a January deficit which was revised from $45.7 billion to $45.9 billion...the value of our February exports rose by $1.8 billion to $178.1 billion on a $1.8 billion increase to $118.6 billion in our exports of goods and a fractional decrease to $59.5 billion in our exports of services, while our imports rose $3.0 billion to $225.1 billion on a $2.7 billion increase to $183.3 billion in our imports of goods and a $0.3 billion increase to $41.8 billion in our imports of services...export prices averaged 0.4% lower in February, so the real exports were greater than the nominal dollar value by that percentage, while import prices were 0.3% lower, similarly incrementally increasing the actual amount of real imports over the dollar values reported here...
the February increase in our exports of goods resulted from greater exports of consumer goods, automotive vehicles, parts and engines, foods and feeds, and other goods, which were partially offset by lower exports of industrial supplies and capital goods...referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of consumer goods rose by $1064 million to $17,043 million on a $629 million increase in our exports of gem diamonds and $341 million increase in our exports of pharmaceutical preparations...our exports of automotive vehicles, parts and engines rose by $344 million on a $568 increase in our exports of new and used passenger vehicles which was partially offset by a $280 million decease in our exports of automotive parts and accessories other than tires and engines....our exports of foods, feeds and beverages rose by $310 million to $9,738 million on small increases in many categories of foods and feeds....in addition, our exports of other goods not categorized by end use rose by $618 million to $4,811 million....meanwhile, our exports of capital goods fell $271 million to $42,532 on a $181 million decrease in our exports of civilian aircraft and a $170 million decrease in our exports of electrical apparatuses, and our exports of industrial supplies and materials fell by $179 million to $31,308 million on a $143 million drop in our exports of petroleum products other than fuel oil...
Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that a jump in imports of consumer goods alone more than accounted for the February increase in our imports, as our imports of consumer goods rose $3,596 million to $51,501 million on a $1,344 million jump in our imports of pharmaceutical preparations, a $552 increase in our imports of toys, games, and sporting goods, a $387 million increase in our imports of textiles other than wool and cotton, a $305 million increase in our imports of cell phones and similar household items and a $271 million increase in our imports of furniture and similar household goods...in addition, our imports of capital goods rose $988 million to $48,967 million on a $422 million increase in our imports of civilian aircraft, a $394 million increase in our imports of computers and a $319 million increase in our imports of computer accessories, and our imports of foods, feeds, and beverages rose by $488 million to $11,210 million on increased imports of fish and shellfish, fruits and juices, beer and wine, and other foods...in addition, our imports of goods not categorized by end use rose by $111 million to $7,201 million...offsetting those increases, our imports of automotive vehicles, parts and engines fell $1526 million to $29,042 million on a $1303 million decrease in our imports of new and used passenger vehicles and a $193 million decrease in our imports of parts and accessories, and our imports of industrial supplies and materials fell by $948 million to $33,606 million on an $890 million drop in our imports of crude oil, a $206 million drop in our imports of fuel oil and a $222 million decrease in our imports of other petroleum products...
to assess the impact of February and January trade data on 1st quarter growth figures, we first need to adjust the value of January's and February's imports and exports for changes in price to get the real quantity of both, and then compare those figures to the similarly adjusted 4th quarter figures...however, exhibit 10 in the pdf for this report already gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here....from that table, we can estimate that 4th quarter real exports of goods averaged 118,760 million monthly in 2009 dollars, while inflation adjusted January and February exports were at 115,988 and 118,544 million respectively, according to that same 2009 dollar quantity index representation....averaging January and February goods exports and then annualizing the change between that average and the fourth quarter, we find that the 1st quarter's real exports of goods are running at a 4.9% annual rate below those of the 4th quarter, or at a pace that would subtract about 0.40 percentage points from 1st quarter GDP.....in a similar manner, we find that our 4th quarter real imports of goods averaged 178,901 million monthly in chained 2009 dollars, while inflation adjusted January and February imports were at 177,759 and 181,890 million respectively after that same adjustment...that would indicate that so far in the 1st quarter, our real imports of goods have increased at a 2.01% annual rate from those of the 4th quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 2.01% rate would thus subtract another 0.25 percentage points from 1st quarter GDP....hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to subtract 0.65 percentage points from 1st quarter GDP...
Factory Shipments Down 0.7% in February, Factory Inventories Down 0.4%
in the widely watched Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf), the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $8.0 billion or 1.7 percent to $454.0 billion in February, following an increase of 1.2% in January, revised from the 1.6% increase reported last month, and a decrease of 2.9% in December, which was unrevised....however, as we learned 5 months ago, the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "the factory orders report"; instead, they use shipments data as a proxy for non-durable orders, which means that both the "new orders" and "unfilled orders" sections of this report really only useful as a revised update to the advance report on durable goods we reported on 2 weeks ago...in the case of February's new orders for durable goods, then, this February Full Report showed that new orders for manufactured durable goods fell $7.0 billion or 3.0% percent to $229.1 billion, revised down from the 2.8% decrease to $229.4 billion reported two weeks ago, which followed a January increase of 4.3% that was revised from the 4.2% increase indicated in that advance report, as new orders for non-defense capital goods excluding aircraft fell by a steeper 2.5% than the 1.8% drop reported in the advance report...including the $1.0 billion decrease in shipments of non-durable goods with the decrease in those orders for durables, then, the Census Bureau reported that new orders for manufactured goods fell by $8.0 billion or 1.7%, which thus became the headline for this report carried in the news media...
more importantly, then, this report indicated that the seasonally adjusted value of February factory shipments fell by $3.4 billion or 0.7 percent to $462.8 billion, the 10th decreasing 11 months, following a 0.2 percent decrease in January, which had previously been reported as a $1.4 billion or 0.3% increase...shipments of durable goods were down $2.4 billion or 1.0 percent to $238.0 billion, revised down from the from the 0.9% decrease reported in the durables report, as lower shipments of transportation equipment led the decrease, falling $1.0 billion or 1.2 percent to $78.9 billion, on a 8.4% drop in shipments of commercial aircraft...without those transportation sector shipments, however, factory shipments were still 0.6% lower, as the value of shipments (and hence of "new orders") of non-durable goods fell by $1.0 billion, or 0.4%, to $225.8 billion with a 2.1% drop in shipments from refineries and a 0.5% drop in shipments of food products accounting that decrease...without the decrease in the value of refinery shipments, the value of shipments of other non-durable goods would have been statistically unchanged...
meanwhile, the aggregate value of February factory inventories fell by $2.6 billion or 0.4 percent to $634.3 billion, their 8th nominal decrease in a row, following a January decrease of 0.2% that was reported as a 0.4% decrease last month....inventories of durable goods fell by $1.3 billion or 0.3 percent to $394.1 billion, $0.2 billion lower than was reported was reported two weeks ago but unchanged in terms of statistical significance, following a 0.2% decrease in January, which had been revised from the 0.1% reported last month in the advance report.....the value of non-durable goods' inventories fell $1.3 billion or 0.5 percent to $240.17 billion, following a decrease of 1.0% in January...the value of inventories at petroleum refineries, down in value most of the year, drove the decrease in non-durable inventories, as they fell by $1.4 billion or 5.4% percent to $24.06 billion, which was undoubtedly mostly due to lower prices...producer prices for finished goods were down 0.6% in February, with producer prices for energy goods down 3.4%, so once factory inventories are adjusted for inflation in our national accounts data, they will likely show a real February increase on the order of 0.2%...
February Wholesale Sales Down 0.2%, Wholesale Inventories Down 0.5%
the February report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $427.6 billion, down 0.2 percent (+/-0.5%) from the revised January level, and 3.1% percent (+/-1.2%) lower than wholesale sales of February 2015... the January preliminary estimate was revised down $0.8 billion or 0.2 percent, leaving January's sales 1.9% below the December level... February wholesale sales of durable goods were up 1.2 percent (+/-0.7%) from January and were down 3.4 percent (+/-1.8%) from a year earlier, with a 3.1% increase in wholesale sales of electrical and electronic goods leading the increase for the month, while wholesale sales of machinery fell 1.4%....wholesale sales of nondurable goods were down 1.6 percent (+/-0.7%) from January and were down 6.2 percent (+/-1.9%) from last February, with wholesale sales petroleum and petroleum products down 10.1% on lower prices...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold....
on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this February report estimated that wholesale inventories were valued at a seasonally adjusted $583.3 billion at month end, a decrease of 0.5 percent (+/-0.4%) from the revised January level but 0.6 percent (+/-1.4%)* higher than February a year ago, with the January preliminary estimate revised downward $2.1 billion or almost 0.4%, and with the January change revised from 0.3% growth to a 0.2% contraction....inventories of durable goods were down 0.1 percent (+/-0.4%)* from January and were down 1.3 percent (+/-1.4%)* from a year earlier, with inventories of lumber and other construction materials down 1.6% on lower prices, while inventories of electrical and electronic goods were up 2.0% on lower sales...at the same time, the value of wholesale inventories of nondurable goods was down 1.1 percent (+/-0.4%) from January, but was up 3.7 percent (+/-1.9%) from last February, as the value of inventories of raw farm products fell 4.2% while wholesale inventories of drugs and drug store sundries fell 3.5%..
as you know, to approximate the effect of the change in wholesale inventories, valued here in current dollars, to the change in GDP, we must first convert these dollar figures into an approximation of the change in the quantity of goods that were inventoried...the BEA does that by deflating the value of each of the categories of inventories with the appropriate sub-index from the producer price index for the same month... however, since inventories are notoriously difficult to estimate without knowing the month that each subset of the total was inventoried, and since the BEA does not break out wholesale inventories from other business inventories in the GDP report, that means all we have to go on is the monthly wholesale data for the 4th quarter...thus we'll just make a rough estimation by referring to the aggregate producer price index for February, which also includes January's price changes, and adjust nominal inventories with them monthly...in February, producer prices for finished goods fell 0.6%, largely on a 3.4% decrease in wholesale energy prices, after January's producer prices for finished goods fell 0.7% on a 5.0% drop in wholesale energy prices...that suggests that the January change in real wholesale inventories was an increase by about 0.5%, after which February real wholesale inventories rose by around 0.1%...that would suggest real wholesale inventories at the end of February were about 0.6% higher than they were at the end of the 4th quarter...our records and prior estimations of the change in wholesale inventories over the 4th quarter was of a real increase in wholesale inventories of about 0.5%…since the GDP calculation looks at the change in the growth of inventories, that means that wholesale inventories at the end of February look like they will be an incremental addition to 1st quarter GDP…
note that our estimate of an small increase in real inventories in the first quarter appears to differ from the assessment of the Atlanta Fed, who’s GDP now algorithm changed their forecast for the contribution of inventory investment to first-quarter real GDP growth from –0.4 percentage points to –0.7 percentage points after the release of this wholesale trade report…we don't necessarily disagree with the Atlanta Fed’s take, because they certainly had to revise their previous forecast lower on the large January revision…the revision to January with this report changed that month’s nominal wholesale inventories from 0.3% growth to a 0.2% contraction….that in effect cut the January growth in real inventories in half, from roughly 1.0% to 0.5%…we assume Atlanta Fed’s prior -0.4 percentage point estimated contribution to GDP had indicated higher wholesale inventories were more than offset by lower factory & retail inventories…after this report, wholesale inventories wont be doing much offsetting of any lower inventories elsewhere…
Job Openings Down, Hiring and Job Quitting Up in February
the Job Openings and Labor Turnover Survey (JOLTS) report for February from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 159,000, from 5,604,000 in January to 5,445,000 in February, after January's job openings were revised higher, from 5,541,000 to 5,604,000...February jobs openings were still 9.2% higher than the 5,131,000 job openings reported in February a year ago, as the job opening ratio expressed as a percentage of the employed fell to 3.7% in February from 3.8% in January but was still up from 3.5% a year ago...the greatest decreases in job openings were in health care and social assistance, where openings fell by 147,000 to 899,000, while job openings in private educational services rose by 48,000 to 131,000 (see table 1 for more details)...like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, linked at the end of the release...
the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in February, seasonally adjusted new hires totaled 5,422,000, up 297,000 from the revised 5,125,000 who were hired or rehired in January, as the hiring rate as a percentage of all employed rose from 3.6% to 3.8%, which was also up from the hiring rate of 3.6% in February a year earlier (details of hiring by industry since September are in table 2)....meanwhile, total separations also rose, by 73,000, from 4,977,000 in January to 5,050,000 in February, while the separations rate as a percentage of the employed remained unchanged at 3.5%, which was still up from the separations rate of 3.4% a year ago (see table 3)...subtracting the 5,050,000 total separations from the total hires of 5,422,000 would imply an increase of 372,000 jobs in February, somewhat more than the revised payroll job increase of 245,000 for February reported by the March establishment survey last week, implying that one of those surveys might be off by more than the expected +/-115,000 margin of error in these incomplete samplings...
breaking down the seasonally adjusted job separations, the BLS finds that 2,950,000 of us voluntarily quit their jobs in February, up 99,000 from the revised 2,851,000 who quit their jobs in January, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.0% to 2.1% of total employment, which was also up from 1.9% a year earlier (see details in table 4)....in addition to those who quit, another 1,715,000 were either laid off, fired or otherwise discharged in February, up 11,000 from the revised 1,704,000 who were discharged in January, which left the discharges rate unchanged at 1.2% of all those who were employed during the month, also same as a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 385,000 in Febuary, down from 422,000 in January, for an 'other separations' rate of 0.3%, which was unchanged....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...