Gross Domestic Product (GDP) decreased at an annual rate of 6.2 percent in the fourth quarter of 2008, according to revised estimates. In the advance estimates, the decrease in real GDP was 3.8 percent. The downward revision to the percent change in real GDP was widespread; the largest contributors were downward revisions to private inventory investment, to exports, and to personal consumption expenditures for nondurable goods. So, the bad news of the advance report released last month has been turned into the worse news of this release.
There was, as the month closes out, good news in 21 percent of February’s Federal statistical output. In February the GNI was 14.7 percent.
Friday, February 27, 2009
Thursday, February 26, 2009
Bad news in homes and factories
Sales of new one-family houses were at a seasonally adjusted annual rate of 309,000 in January, a rate down 10.2 percent from December 2009 and at only about half that recorded in January 2008. There were 342,000 homes for sale at the end of January; this represents 13.3 months’ supply at the current sales rate. None of this should come as any particular surprise, but it is still bad news, the worst being the more-than-a-year's overhang of unsold houses. Long ago, economist John Maurice Clark identified residential construction as one of the strategic sectors in understanding the business cycle and a sluggish, over-supplied housing market is certainly bad news for that sector.
New orders for manufactured durable goods decreased 5.2 percent to $163.8 billion in January. This was the sixth consecutive monthly decrease and represented an accelerated dive from December's figures. Again, this is the bad news we expected from the hardgoods industries.
With two more "zeros" added in, our diffusion index of good versus bad economic news now stands at 22.2 percent good for February. The only indicator left is a revision of the fourth quarter GDP numbers and that will only tweak the bad news we got at the end of January. Still, the good news index (GNI) will have edged up from last month.
New orders for manufactured durable goods decreased 5.2 percent to $163.8 billion in January. This was the sixth consecutive monthly decrease and represented an accelerated dive from December's figures. Again, this is the bad news we expected from the hardgoods industries.
With two more "zeros" added in, our diffusion index of good versus bad economic news now stands at 22.2 percent good for February. The only indicator left is a revision of the fourth quarter GDP numbers and that will only tweak the bad news we got at the end of January. Still, the good news index (GNI) will have edged up from last month.
Saturday, February 21, 2009
Consumer prices stable, real earnings stagnant
On a seasonally adjusted basis, CPI-U increased 0.3 percent in January after declining in each of the three previous months. Prices for all items less food and energy (core-CPI) rose 0.2 percent in January. This non-deflationary report is good news. (Good)
Real average weekly earnings fell by a mere 0.1 percent from December to January. A 0.3 percent increase in average hourly earnings was offset by a 0.3 percent increase in the CPI-W. Average weekly hours were unchanged. In the context of recent reports in which deflationary price movements offset shrinking workweeks, this is, at worst, a neutral report. (Neutral)
After recording these two signals, the GNI stands at 25 percent for February, with only a couple more reports to go.
Real average weekly earnings fell by a mere 0.1 percent from December to January. A 0.3 percent increase in average hourly earnings was offset by a 0.3 percent increase in the CPI-W. Average weekly hours were unchanged. In the context of recent reports in which deflationary price movements offset shrinking workweeks, this is, at worst, a neutral report. (Neutral)
After recording these two signals, the GNI stands at 25 percent for February, with only a couple more reports to go.
Thursday, February 19, 2009
A quick game of catch-up
I have been away on travel for one client and also engaged in a consulting gig with one of the more social statistics-oriented agencies. So, this is a quicker and dirtier than usual run through developments in economic statistics so far in February. Note that, after all that follows, my Good News Index (GNI) for February is at 17.9 percent as of today.
PPI: A 0.8 percent increase followed declines of 1.9 percent in December and 2.5 percent in November. At the earlier stages of processing, the decrease in prices for intermediate materials slowed to 0.7 percent from 4.2 percent, and the index for crude materials declined 2.9 percent after dropping 5.3 percent in December. Although this report contains some good news (declining rates of price deterioration), the topside number is outside the upper bound of my range of comfort, and the volatility itself is not useful at this point. (Bad news)
Housing starts and permits: Starts in January were at a seasonally adjusted annual rate of 466,000. This was 16.8 percent below December. (Bad news, and no surprise)
Industrial production and capacity utilization: Industrial production fell 1.8 percent in January. The capacity utilization rate for total industry fell to 72.0 percent. (Bad news)
International prices: The Import Price Index declined 1.1 percent in January, following decreases in each of the previous five months. In contrast, export prices rose for the first time in six months, advancing 0.5 percent in January. (Mixed, leaning to bad.)
Business sales: down 3.2 percent (±0.2%) from November 2008 and down 11.8 percent from December 2007. Inventories were down, but their ratio to sales edged up. (On balance, bad news)
Retail sales: Retail and food services sales for January, were $344.6 billion, an
increase of 1.0 percent from the previous month. (Good)
Balance of trade: December exports were $8.5 billion less than November exports of $142.3 billion. December imports were $10.2 billion less than November imports of $183.9 billion. (This is a bad news way to narrow the trade deficit—mixed on balance.)
Wholesale trade: December 2008 sales of merchant wholesalers were $336.1 billion, down 3.6 percent from November. Inventories fell, but their ratio to sales crept up. (Bad)
Employment: Nonfarm payroll employment fell 5908,00 in January and the unemployment rate rose from 7.2 to 7.6 percent. Our proprietary index of the labor market also declined sharply as all five indicators went the wrong way. (Bad)
Factory sales: New orders for manufactured goods in December, down five consecutive months, decreased $14.8 billion or 3.9 percent. This was the longest streak of consecutive monthly decreases in a decade and a half. The unfilled orders-to-shipments ratio was 5.82, down from 5.87 in November. The inventories-to-shipments ratio was 1.44, up from 1.42 in November. (Bad throughout)
Consumer credit: Consumer credit decreased at an annual rate of 3 percent in the fourth quarter. (Bad)
Productivity: Output per hour for the nonfarm business sector rose 3.2 percent as output declined 5.5 percent and hours fell 8.4 percent. (This is a bad way to increase productivity—mixed on balance.)
Personal Income and spending: Personal income decreased $25.3 billion, or 0.2 percent, and disposable personal income decreased $25.1 billion, or 0.2 percent, in December. Personal consumption expenditures decreased $102.4 billion, or 1.0 percent. (Bad both ways)
Construction spending: Construction spending during December 2008 was at a seasonally adjusted annual rate of $1,053.7 billion, 1.4 percent below the revised November estimate. Just missed being neutral (the margin of error is + or – 1.3 percent), but still bad news. (Bad)
Housing vacancies: The rental vacancy rate was 10.1 percent in the fourth quarter of 2008—higher than the fourth quarter rate for 2007 (9.6 percent), but not statistically different from the rate last quarter (9.9 percent in III:08). For homeowner vacancies, the current rate of 2.9 percent was not statistically different from the fourth quarter 2007 rate or the rate last quarter (2.8 percent each). (Not used in the GNI)
PPI: A 0.8 percent increase followed declines of 1.9 percent in December and 2.5 percent in November. At the earlier stages of processing, the decrease in prices for intermediate materials slowed to 0.7 percent from 4.2 percent, and the index for crude materials declined 2.9 percent after dropping 5.3 percent in December. Although this report contains some good news (declining rates of price deterioration), the topside number is outside the upper bound of my range of comfort, and the volatility itself is not useful at this point. (Bad news)
Housing starts and permits: Starts in January were at a seasonally adjusted annual rate of 466,000. This was 16.8 percent below December. (Bad news, and no surprise)
Industrial production and capacity utilization: Industrial production fell 1.8 percent in January. The capacity utilization rate for total industry fell to 72.0 percent. (Bad news)
International prices: The Import Price Index declined 1.1 percent in January, following decreases in each of the previous five months. In contrast, export prices rose for the first time in six months, advancing 0.5 percent in January. (Mixed, leaning to bad.)
Business sales: down 3.2 percent (±0.2%) from November 2008 and down 11.8 percent from December 2007. Inventories were down, but their ratio to sales edged up. (On balance, bad news)
Retail sales: Retail and food services sales for January, were $344.6 billion, an
increase of 1.0 percent from the previous month. (Good)
Balance of trade: December exports were $8.5 billion less than November exports of $142.3 billion. December imports were $10.2 billion less than November imports of $183.9 billion. (This is a bad news way to narrow the trade deficit—mixed on balance.)
Wholesale trade: December 2008 sales of merchant wholesalers were $336.1 billion, down 3.6 percent from November. Inventories fell, but their ratio to sales crept up. (Bad)
Employment: Nonfarm payroll employment fell 5908,00 in January and the unemployment rate rose from 7.2 to 7.6 percent. Our proprietary index of the labor market also declined sharply as all five indicators went the wrong way. (Bad)
Factory sales: New orders for manufactured goods in December, down five consecutive months, decreased $14.8 billion or 3.9 percent. This was the longest streak of consecutive monthly decreases in a decade and a half. The unfilled orders-to-shipments ratio was 5.82, down from 5.87 in November. The inventories-to-shipments ratio was 1.44, up from 1.42 in November. (Bad throughout)
Consumer credit: Consumer credit decreased at an annual rate of 3 percent in the fourth quarter. (Bad)
Productivity: Output per hour for the nonfarm business sector rose 3.2 percent as output declined 5.5 percent and hours fell 8.4 percent. (This is a bad way to increase productivity—mixed on balance.)
Personal Income and spending: Personal income decreased $25.3 billion, or 0.2 percent, and disposable personal income decreased $25.1 billion, or 0.2 percent, in December. Personal consumption expenditures decreased $102.4 billion, or 1.0 percent. (Bad both ways)
Construction spending: Construction spending during December 2008 was at a seasonally adjusted annual rate of $1,053.7 billion, 1.4 percent below the revised November estimate. Just missed being neutral (the margin of error is + or – 1.3 percent), but still bad news. (Bad)
Housing vacancies: The rental vacancy rate was 10.1 percent in the fourth quarter of 2008—higher than the fourth quarter rate for 2007 (9.6 percent), but not statistically different from the rate last quarter (9.9 percent in III:08). For homeowner vacancies, the current rate of 2.9 percent was not statistically different from the fourth quarter 2007 rate or the rate last quarter (2.8 percent each). (Not used in the GNI)
Friday, January 30, 2009
Manufacturing slide, housing collapse
New orders, shipments, and unfilled orders for manufactured durable goods all declined in December. Inventories rose over the month. The decline in shipments was 0.7 percent while the unfilled orders book shrank 1.3 percent. Taken together, these data imply that the cushion of unfilled orders is being eroded.
Sales of new one-family houses in December 2008 were at a seasonally adjusted annual rate of 331,000. This is 14.7 percent below November and 44.8 percent below December 2007.
Both of these reports are pretty unambiguously bad news. The decline in new orders was fractionally less severe than last month, but even Pollyanna couldn’t make lemonade out of that.
The diffusion of good news in January’s statistical releases now stands at 14.7 percent. There are two releases to go—GDP (Q4) and ECI (Dec)—so I can’t see this rising much. Even if both max out, less than a quarter of the news we have seen this month would have been negative.
Sales of new one-family houses in December 2008 were at a seasonally adjusted annual rate of 331,000. This is 14.7 percent below November and 44.8 percent below December 2007.
Both of these reports are pretty unambiguously bad news. The decline in new orders was fractionally less severe than last month, but even Pollyanna couldn’t make lemonade out of that.
The diffusion of good news in January’s statistical releases now stands at 14.7 percent. There are two releases to go—GDP (Q4) and ECI (Dec)—so I can’t see this rising much. Even if both max out, less than a quarter of the news we have seen this month would have been negative.
Friday, January 23, 2009
Straw houses
Privately-owned housing units authorized by building permits in December 2008 were at a seasonally adjusted annual rate of 549,000, down 10.7 percent from November and 50.6 percent from December 2007.
Private housing starts were at an annual rate of 550,000 last December. This is 15.5 percent below November and 45 percent below December 2007.
Housing completions in December 2008 were at an annual rate of 1,015,000. This is 5.2 percent below November and 23.6 percent below December 2007.
It is hard to imagine a more negative report, although we may have to, given the million-unit housing overhang I heard about last October (See the November 4 post’s October 30 entry.) It may well be that the collapse of the housing bubble is the shock that is driving this recession—and driving it into the “longer recession” category.
Our next look at the new residential construction data will come February 18. Will you dare to keep your hands in the air and off the grab bar?
With only a very few reports left to go this month, the good news index (GNI) stands at 16.7 percent for January releases.
Private housing starts were at an annual rate of 550,000 last December. This is 15.5 percent below November and 45 percent below December 2007.
Housing completions in December 2008 were at an annual rate of 1,015,000. This is 5.2 percent below November and 23.6 percent below December 2007.
It is hard to imagine a more negative report, although we may have to, given the million-unit housing overhang I heard about last October (See the November 4 post’s October 30 entry.) It may well be that the collapse of the housing bubble is the shock that is driving this recession—and driving it into the “longer recession” category.
Our next look at the new residential construction data will come February 18. Will you dare to keep your hands in the air and off the grab bar?
With only a very few reports left to go this month, the good news index (GNI) stands at 16.7 percent for January releases.
Friday, January 16, 2009
CPI not bad, IP not good
On a seasonally adjusted basis, the CPI-U decreased 0.7 percent in December, the third consecutive decline. The index is now only 0.1 percent higher than in December 2007. Declining energy prices, particularly for gasoline, again drove most of the decline.
Excluding energy, the index was virtually unchanged for the third straight month. The index for all items excluding both food and energy also was virtually unchanged in December.
Excluding food and energy, the CPI declined at a 0.3 percent seasonally-adjusted annual rate (SAAR) during the last quarter of 2008, after increasing at rates of 2.0, 2.5, and 2.7 percent during the first three quarters. The volatile energy component of the CPI fell at a SAAR of 76.6 percent during the fourth quarter, driving an overall rate of decline of 12.7 percent.
For the 12 month period ending December 2008, the CPI-U rose 0.1 percent. This was the smallest calendar year increase since a 0.7 percent decline in 1954 and compares with a 4.1 percent increase for the 12 months ended December 2007. The “core” CPI (exclude food and energy) rose at a moderate 1.8 percent December to December.
As much as I suspect judgment calls, I am willing to say that there is enough good news below the energy-driven topside declines to rate this as a “mixed” report. The core numbers are within my somewhat arbitrary price stability parameters (+ or – 4 percent per year) and there is relative stability in about three-quarters of the major expenditure categories in monthly, quarterly, and annual time frames.
Real average weekly earnings rose by 0.6 percent in December 2008. A 0.3 percent increase in average hourly earnings and a 0.9 percent decrease in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) were partially offset by a 0.6 percent decrease in average weekly hours. Over the year, real earnings increased 2.9 percent.
While no one is happy with the hours component of this story, a substantial increase in real hourly wages and a pretty solid over-the-year increase in weekly earnings is hard to classify as anything other than good news.
Industrial production fell 2.0 percent in December, and declines were again widespread. For the fourth quarter as a whole, total industrial production decreased at an annualized rate 11.5 percent. Capacity utilization for total industry fell to 73.6 percent in December, a level 7.4 percentage points below its average level from 1972 to 2007.
Again, a report that doesn’t take a particularly keen judgment to classify as bad news. In historical perspective, the capacity utilization rate is as low as it got during the 2001 recession and five points below its trough in 1990-91.
With a good, a bad, and a mixed report, the good news index for January is at 17.9 percent. There are only a handful of reports left to go this month, and given that two of them are direct measures of the housing market, I’d not bet on this going up much as we close out.
Excluding energy, the index was virtually unchanged for the third straight month. The index for all items excluding both food and energy also was virtually unchanged in December.
Excluding food and energy, the CPI declined at a 0.3 percent seasonally-adjusted annual rate (SAAR) during the last quarter of 2008, after increasing at rates of 2.0, 2.5, and 2.7 percent during the first three quarters. The volatile energy component of the CPI fell at a SAAR of 76.6 percent during the fourth quarter, driving an overall rate of decline of 12.7 percent.
For the 12 month period ending December 2008, the CPI-U rose 0.1 percent. This was the smallest calendar year increase since a 0.7 percent decline in 1954 and compares with a 4.1 percent increase for the 12 months ended December 2007. The “core” CPI (exclude food and energy) rose at a moderate 1.8 percent December to December.
As much as I suspect judgment calls, I am willing to say that there is enough good news below the energy-driven topside declines to rate this as a “mixed” report. The core numbers are within my somewhat arbitrary price stability parameters (+ or – 4 percent per year) and there is relative stability in about three-quarters of the major expenditure categories in monthly, quarterly, and annual time frames.
Real average weekly earnings rose by 0.6 percent in December 2008. A 0.3 percent increase in average hourly earnings and a 0.9 percent decrease in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) were partially offset by a 0.6 percent decrease in average weekly hours. Over the year, real earnings increased 2.9 percent.
While no one is happy with the hours component of this story, a substantial increase in real hourly wages and a pretty solid over-the-year increase in weekly earnings is hard to classify as anything other than good news.
Industrial production fell 2.0 percent in December, and declines were again widespread. For the fourth quarter as a whole, total industrial production decreased at an annualized rate 11.5 percent. Capacity utilization for total industry fell to 73.6 percent in December, a level 7.4 percentage points below its average level from 1972 to 2007.
Again, a report that doesn’t take a particularly keen judgment to classify as bad news. In historical perspective, the capacity utilization rate is as low as it got during the 2001 recession and five points below its trough in 1990-91.
With a good, a bad, and a mixed report, the good news index for January is at 17.9 percent. There are only a handful of reports left to go this month, and given that two of them are direct measures of the housing market, I’d not bet on this going up much as we close out.
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