Written by rjs, MarketWatch 666
September’s jobs report; 3rd estimate of 2nd quarter GDP; August’s income and outlays, new construction, and factory inventories
This week was one of the infrequent times where we see the release of the key end-of-the-month reports and the key first of the month reports during the same week, and hence this week we have the 3rd estimate of 2nd quarter GDP from the Bureau of Economic Analysis, and the August report on Personal Income and Spending, also from the BEA, which includes 2 months of data on personal consumption expenditures and hence will account for more than 46% of 3rd quarter GDP, and the Employment Situation Summary for September from the Bureau of Labor Statistics.
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Other major reports released this week included the August report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for August, both from the Census Bureau…
This week’s major privately issued reports included the ADP Employment Report for September and the September report on light vehicle sales from Wards Automotive, (the source of the BEA’s data) which estimated that vehicles sold at a 16.34 million annual rate in September, up from the 15.19 million annual rate in August, but down from the 17.19 million annual sales rate in September of last year, and the Case-Shiller Home Price Index for July, which is an index generated by comparing relative sales prices for May, June and July repeat home sales to their earlier selling prices, and which reported that home prices nationally for those 3 months averaged 4.8% higher than prices for the same homes that sold during the same 3 month period a year earlier, up from the 4.3% year over year increase shown in the prior report….this week also saw the release of the widely followed manufacturing purchasing manager’s survey from the Institute for Supply Management (ISM): the September Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 55.4% in September, down from 56.0% in August, indicating a slightly smaller plurality of manufacturing purchasing managers reported expansion in various facets of their business in September.
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Employers Add 661,000 Jobs in September; Labor Force Participation Rate Falls to 61.4%
The Employment Situation Summary for September indicated that the rebound in payroll jobs from their April nadir continued for a 5th consecutive month, and that the unemployment rate fell by 0.5% to 7.9%, but that the the labor force participation rate fell by 0.3% to to 61.4% … .estimates extrapolated from the establishment survey data projected that employers added a seasonally adjusted 661,000 jobs in September, after the previously estimated payroll job increase for July was revised up from 1,734,000 to 1,761,000 and the payroll jobs increase for August was revised up from 1,371,000 to 1,489,000 … .thus, those revisions mean that the combined number of jobs created over those two months was 145,000 more than was previously reported…..the unadjusted data, meanwhile, shows that there were actually 1,137,000 more payroll jobs in September, largely due to job increases relating to the beginning of the school year, and that the seasonal adjustment brought the headline jobs number down to a level where that normal September increase was negated…
Seasonally adjusted job increases in September were seen throughout the private goods producing and service sectors, with only jobs in various branches of government seeing a net seasonally adjusted employment decrease 216,000 jobs, mostly due to local school systems adding 231,100 fewer jobs and state universities adding 49,400 fewer jobs than is normal for September…returning jobs in the leisure and hospitality sector accounted for a seasonally adjusted increase of 318,000 jobs in September, with the return of 200,300 jobs in bars and restaurants and 68,800 more employed in amusements, gambling, and recreation…the retail sector saw an increase of 142,400 jobs, with 39,800 workers returning to jobs in clothing stores, and 19,500 returning to jobs in general merchandise stores….at the same time, employment in health care and social assistance rose by 107,700, led by the addition of 31,700 jobs in individual and family services and 18,200 jobs in doctor’s offices….in addition, the broad professional and business services category added 89,000 jobs, as 22,400 workers found jobs in services to buildings and dwellings and 13,100 were hired by architectural and engineering services…September also saw the addition of 73,600 jobs in transportation and warehousing, with 32,200 of those in warehousing and storage and 21,400 in transit and ground passenger transportation… meanwhile, employment in manufacturing increased by 66,000, with 14,300 of those working in manufacture of motor vehicles and parts and 13,800 more in the manufacture of machinery…another 37,000 jobs were added in various financial activities, led by 11,900 in real estate and 8,100 in rental and leasing services…and “other services” added 36,000 more to the month’s total, with 30,600 of those working in membership associations and organizations…other September job additions included 27,000 jobs in the information sector, 26,000 jobs in construction, 18,700 in wholesale trade, 2,800 with utilities and 1,000 jobs in resource extraction..
The establishment survey also showed that average hourly pay for all employees rose by two cents an hour to $29.47 an hour, after it had increased by a revised 10 cents an hour in August; at the same time, the average hourly earnings of production and non-supervisory employees increased by a penny to $24.79 an hour…employers also reported that the average workweek for all private payroll employees rose by 0.1 hour to 34.7 hours in September, while hours for production and non-supervisory personnel rose by 0.1 hour to 34.1 hours, after their August workweek had been unchanged…at the same time, the manufacturing workweek rose by 0.2 hour to 40.2 hours after rising 0.3 hours in August, while average factory overtime decreased by 0.1 hour to 2.9 hours…
Meanwhile, the seasonally adjusted extrapolation from the September household survey indicated that the number of those who would self-report being employed rose by an estimated 275,000 to 147,563,000, while the similarly estimated number of those who would qualify as being unemployed fell by 970,000 to 12,580,000; and hence the civilian labor force decreased by a net of 695,000…since the working age population had grown by 184,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 879,000 to 100,599,000, which combined with the lower labor force was enough to lower the labor force participation rate from 61.7% to 61.4%…however, the relatively large increase in number employed was still enough to boost the employment to population ratio, which we could think of as an employment rate, as it rose from 56.5% to 56.6%…at the same time, the relatively large drop in the number unemployed was also enough to lower the unemployment rate by 0.5%, from 8.4% to 7.9%, which was the lowest unemployment rate since March…meanwhile, the number of the employed who reported they were forced to accept just part time work fell by 1,272,000, from 7,572,000 in August to 6,300,000 in September, which was enough to lower the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, from 14.2% of the labor force in August to 12.8% in September, also the lowest since March….
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.
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2nd Quarter GDP Revised to Show Our Economy Shrunk at a 31.4% Rate
The Third Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services shrunk at a 31.4% annual rate in the 2nd quarter, revised from the 31.7% contraction rate reported in the second estimate a month ago, as personal consumption expenditures shrunk somewhat less than was previously estimated, more than offsetting downward revisions to private fixed investment, inventories, exports and federal government growth….in current dollars, our second quarter GDP fell at a 32.82% annual rate, decreasing from what would work out to be a $21,561.1 billion a year rate in the 1st quarter to a $19,520.1 billion annual rate in the 2nd quarter, with the headline 31.4% annualized rate of decrease in real output arrived at after annualized GDP inflation adjustments averaging minus 1.8% were computed and applied to the current dollar change of the components, revised from the negative 2.0% GDP deflator indicated by the 2nd estimate…
As we review this month’s revisions, remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change that’s compounded by 4 times of that which actually occurred from one 3 month period to the next, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price changes now chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which are then used as quantity indexes, rather 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 2nd quarter GDP, which you may have to access by using the BEA’s main GDP page…specifically, we’ll be referencing table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 3rd quarter of 2016; table 2, which shows the contribution of each of the components to the GDP change for those months and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the major GDP components…the pdf for the 2nd quarter’s second estimate, which this estimate revises, is here…
The decrease of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 34.1% contraction rate reported last month to indicate 2nd quarter PCE shrunk at a 33.2% rate in this month’s estimate … that PCE contraction figure was arrived at by deflating the 34.3% contraction rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation shrunk at a 1.6% annual rate in the 2nd quarter, revised from the minus 1.8% PCE inflation rate published a month ago…real consumption of durable goods fell at a 1.7% annual rate, which was revised from the 1.3% decrease shown in the advance report, but subtracted no percentage points from GDP in the BEA’s computational equivalent of a rounding error, as increases in real consumption of automobiles and recreational goods and vehicles offset the decreases in consumption of furniture, appliances and other durable goods….meanwhile, real consumption of nondurable goods by individuals shrunk at a 15.0% annual rate, revised from the 14.9% increase reported in the 2nd estimate, and subtracted 2.05 percentage points from the 2nd quarter’s economic growth, as real decreases in consumption of clothing and energy goods accounted for nearly 90% of the quarter’s nondurables drop … .at the same time, consumption of services shrunk at a 41.8% annual rate, revised from the 43.1% contraction rate reported last month, and subtracted 21.95 percentage points from the final GDP figure, as health care services, recreation services, and food services and accommodation all fell at rates exceeding 50%…
At the same time, seasonally adjusted real gross private domestic investment shrunk at a 46.6% annual rate in the 2nd quarter, revised from the 46.2% contraction estimate reported last month, as real private fixed investment fell at a 29.2% rate, rather than at the 28.9% rate reported in the second estimate, while business and farm inventories fell by a bit more than had been previously estimated…real investment in non-residential structures was revised from shrinking at a 33.4% rate to shrinking at a 33.6% rate, while real investment in equipment contracted at a 35.9% rate, statistically unchanged from the contraction rate previously reported…at the same time, the quarter’s investment in intellectual property products was revised from shrinking at a 7.7% rate to shrinking at a 11.4% rate, and the contraction in real residential investment was revised from shrinking at a 37.9% annual rate to shrinking at a 35.6% rate … after those revisions, the contraction in investment in non-residential structures subtracted 1.11 percentage points from the increase in 2nd quarter GDP and the decrease in investment in equipment subtracted 2.03 percentage points from the quarter’s growth, while the decrease in investment in intellectual property subtracted 0.53 percentage points and the decrease in residential investment subtracted 1.60 percentage points from the 2nd quarter’s growth rate…
Meanwhile, the drop in real private inventories was revised from the previously reported $286.4 billion in inflation adjusted dollars to show inventories decreased at an inflation adjusted $287.0 billion rate…this came after inventories had shrunk by an inflation adjusted $80.9 billion rate in the 1st quarter, and hence the $206.1 billion negative change in real inventories from those of the 1st quarter subtracted 3.50 percentage points from the 2nd quarter’s growth rate, revised from the 3.46 percentage point subtraction due to inventory shrinkage shown in the second estimate….however, since shrinking inventories indicates that less of the goods produced during the quarter were left “sitting on the shelf” or in a warehouse, that decrease by an adjusted $206.1 billion meant that real final sales of GDP were actually greater by that much, and therefore the BEA found that real final sales of GDP fell at a 28.1% rate in the 2nd quarter, revised from the 28.5% rate of decrease shown in the second estimate…
The previously reported decrease in real exports was somewhat greater with this estimate, while the previously reported decrease in real imports was revised just a bit lower, and as a result our net trade was a smaller addition to GDP than was previously reported…our real exports of goods and services shrunk at a 64.4% rate in the 1st quarter, revised from the 63.2% shrinkage rate shown 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 greater decrease conversely subtracted 9.51 percentage points from the 1st quarter’s growth rate, revised from the 9.22 subtraction shown last month…meanwhile, the previously reported 54.0% decrease in our real imports was revised to a 54.1% decrease, and since imports subtract from GDP because they represent either consumption or investment that was not produced in the US, their decrease conversely added 10.13 percentage points to 1st quarter GDP, revised from the 10.12 percentage point addition shown a month ago….thus, the improving US trade balance that accompanied the collapse in global trade added a rounded 0.62 percentage points to 2nd quarter GDP, down from the 0.90 percentage point addition resulting from an improving foreign trade balance that was indicated by the second estimate..
Finally, there was also a downward revision to real government consumption and investment in this 3rd estimate, as the entire government sector is now shown growing at a 2.5% rate, revised from the 2.8% growth rate for government indicated by the 2nd estimate….real federal government consumption and investment was seen to have grown at a 16.4% rate from that of the 1st quarter in this estimate, which was revised from the 17.6% growth rate shown in the 2nd estimate, as real federal outlays for defense grew at a 3.8% rate, revised from the previously reported 4.2% defense growth rate, and added 0.18 percentage points to 2nd quarter GDP, while all other federal consumption and investment grew at a 37.6% rate, revised from last month’s 40.1% rate, and added 0.98 percentage points to GDP….meanwhile, real state and local consumption and investment shrunk at a 5.4% rate in the quarter, revised from the 5.5% contraction rate shown in the 2nd estimate, and subtracted 0.40 percentage points from 2nd quarter GDP, which was revised from the 0.41 percentage point subtraction shown in the second estimate…note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures, and only when such funds are spent on goods or services, thereby indicating an increase in the output of those goods or services.
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August Personal Income down 2.7%; 2 Months PCE Would Add 25.36 Percentage Points to Q3 GDP
The August report Personal Income and Outlays from the Bureau of Economic Analysis gives us nearly half the data that will go into 3rd quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, and 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….this report also gives us monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate…however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics is not the current monthly change; rather, they’re seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much national income and spending would change over a year if August’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 July to August….
Thus, when the opening line of the news release for this report tell us “Personal income decreased $543.5 billion (2.7 percent) in August“, they mean that the annualized figure for seasonally adjusted personal income in August, $19,492.8 billion, was $543.5 billion, or 2.7% less than the annualized personal income figure of $20,036.3 billion for July; the actual, unadjusted change in personal income from July to August, which would be on the order of one-twelfth of that size, is not given…similarly, annualized disposable personal income, which is income after taxes, fell by nearly 3.2%, from an annual rate of $17,873.9 billion in July to an annual rate of $17,303.0 billion in August….the monthly contributors to the decrease in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are thus also annualized…in August, the reason for the $543.5 billion annual rate of decrease in personal income was a $725.3 billion annual rate of decrease in personal current transfer receipts (reflecting the end of the emergency unemployment stipends), which was partially offset by a $119.9 billion annual rate of increase in wages and salaries..
For personal consumption expenditures (PCE), BEA reports that they increased at a $141.1 billion annual rate, or by almost 1.0 percent, as the annual rate of PCE rose from $14,228.5 billion in July to $14,369.6 in August; that was after the July PCE figure was revised up from the originally reported $14,199.5 billion annually, and prior months were revised as well, all of which were already included in the concurrent 3rd estimate of 2nd quarter GDP…..total personal outlays for August, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $152.9 billion to $14,868.4 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $2,434.6 billion annual rate in August, down from the revised $3,158.4 billion annualized personal savings in July… hence, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 14.1% in August, down from 17.7% in July..
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 2012 prices = 100, and which is included in Table 9 in the pdf for this report….that index rose from 111.287 in July to 111.639 in August, a month over month inflation rate that’s statistically 0.3163%, which BEA reports as a 0.3% increase, following the rounded +0.4% change in the PCE price index they reported for July…applying the August inflation adjustment to the nominal change of August spending left real PCE up a rounded 0.7% in August, after a real PCE increase of 1.1% in July …note 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 chained 2012 dollars, which are the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….that result is shown in table 7 of the PDF, where we see that August’s chained dollar personal consumption total works out to 12,874.4 billion annually, 0.67327% more than July’s 12,788.3 billion, a difference that the BEA rounds up and reports as +0.7%…
However, to estimate the impact of the change in real PCE on the change in GDP, month over month changes such as that don’t help us much, since GDP is reported quarterly…thus we have to compare July and August’s real PCE to the the real PCE of the 3 months of the second quarter….while this report reports real PCE for each of those months separately, the BEA also provides the annualized chained dollar PCE for those three months quarterly in table 8 in the pdf for this report, where we find that the annualized real PCE for the 2nd quarter was represented by 11,860.3 billion in chained 2012 dollars…(note that’s also what’s shown in table 3 of the pdf for the revised 2nd quarter GDP report)….then, by averaging the annualized chained 2012 dollar figures for July and August, 12,788.3 billion and 12,874.4 billion respectively, we get an equivalent annualized PCE for the two months of the 3rd quarter that we have data for so far….when we compare that average of 12,831.35 billion to the 2nd quarter real PCE of 11,860.3 billion, we find that 3rd quarter real PCE has grown at a 37.00% annual rate for the two months of the 3rd quarter that we have…{note the math we’ve used to get that annual growth rate: (((12,788.3 + 12,874.4)/ 2) / 11,860.3) ^ 4 = 1.369956 } …that’s a pace that would add 25.36 percentage points to the growth rate of the 3rd quarter, even if there should be no improvement in September’s real PCE from that July & August average.
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Construction Spending Rose 1.4% in August after June and July Spending were Revised Higher
The August report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending construction spending for the month was at an annual rate of $1,412.8 billion, which was 1.4 percent (plus/minus 1.0 percent) above the revised annualized estimate of $1,392.7 billion in construction spending in July, and was 2.5 percent (plus/minus 1.5 percent) above the estimated annualized level of construction spending of August of last year….July construction spending was originally reported at a $1,364.6 billion annual rate, and it has thus been revised up to a $1,392.7 billion annual rate, while June construction spending was revised from the $1,362.8 billion annual rate reported last month to a $1,383,647 billion rate, which would mean that 2nd quarter GDP was underestimated by about 0.17 percentage points…however, 2nd quarter’s GDP will not be revised to reflect that underestimation until the annual revision of next summer…
A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:
- Private Construction – Spending on private construction was at a seasonally adjusted annual rate of $1,061.4 billion, 1.9 percent (plus/minus 0.7 percent) above the revised July estimate of $1,041.7 billion. Residential construction was at a seasonally adjusted annual rate of $589.4 billion in August, 3.7 percent (plus/minus 1.3 percent) above the revised July estimate of $568.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $472.0 billion in August, 0.3 percent (plus/minus 0.7 percent)* below the revised July estimate of $473.4 billion.
- Public Construction – In August, the estimated seasonally adjusted annual rate of public construction spending was $351.4 billion, 0.1 percent (plus/minus 1.8 percent)* above the revised July estimate of $350.9 billion. Educational construction was at a seasonally adjusted annual rate of $82.6 billion, 0.6 percent (plus/minus 1.8 percent)* above the revised July estimate of $82.2 billion. Highway construction was at a seasonally adjusted annual rate of $100.6 billion, 1.9 percent (plus/minus 4.6 percent)* above the revised July estimate of $98.7 billion.
This construction spending report is used as source data for 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and government investment outlays, for both state and local and Federal governments…. however, gauging the impact of revised July and August construction spending as reported here on 3rd quarter GDP is difficult because all figures given in this report are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…accurately adjusting construction for price changes is not easy either, because the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for the various components of non-residential investment, such as the Engineering News Record construction cost index for utilities construction spending….so in lieu of trying to find and adjust for all of those obscure price indices, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed in order to make a ballpark estimate.
That producer price index showed that aggregate construction costs fell 0.2% in August after rising 0.6% in July, falling 0.3% in June and being unchanged from April to May…on that basis, we can estimate that construction costs for August were roughly 0.4% more than June, roughly 0.1% more than those of May and also roughly 0.1% more than those of April, while obviously 0.2% less than those of July…we then use those percentages to inflate lower priced spending figures for each of the 2nd quarter months, which is arithmetically the same as adjusting higher priced July and August construction spending downward, for comparison purposes… annualized construction spending in millions of dollars for the second quarter months is shown at 1,383,647 for June, 1,369,363 for May, and 1,387,936 for April in this report, while it was at $1,392,653 million for July and $1,412,823 million for August…thus to compare July and August’s inflation adjusted construction spending to that of the second quarter, our formula becomes: ((1,412,823 + 1,392,653 * 0.998) / 2 ) / ((1,383,647 * 1.004 + 1,369,363 * 1.001 + 1,387,936 *1.001) / 3) = 1.01321, meaning real construction over July and August was 1.321% higher than that of the 2nd quarter…that means that after adjusting for inflation, real construction for the 3rd quarter rose at a 5.388% annual rate from that of the 2nd quarter…that’s growth at a $18.266 billion annual rate, which means that even if September shows no improvement, growth in construction would add a net of about 0.44 percentage points to 3rd quarter GDP across those components that it influences.
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Factory Shipments Up 0.3% in August, Factory Inventories Statistically Unchanged
The August Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $3.2 billion or 0.7 percent to $470.1 billion in August, following an increase of 6.5% to $466.9 billion in July, which was revised from the 6.4% increase to $466.1 billion in new orders reported last month….however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only accurate as revised updates to the August advance report on durable goods we reported on last week…on those revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we’ll just quote directly from that summary here:
- Summary: New orders for manufactured goods in August, up four consecutive months, increased $3.2 billion or 0.7 percent to $470.1 billion, the U.S. Census Bureau reported today. This followed a 6.5 percent July increase. Shipments, also up four consecutive months, increased $1.4 billion or 0.3 percent to $481.3 billion. This followed a 4.7 percent July increase. Unfilled orders, down five of the last six months, decreased $6.2 billion or 0.6 percent to $1,078.6 billion. This followed a 0.7 percent July decrease. The unfilled orders-to-shipments ratio was 6.60, down from 6.69 in July. Inventories, up three of the last four months, increased $0.2 billion or virtually unchanged to $686.6 billion. This followed a 0.6 percent July decrease. The inventories-to-shipments ratio was 1.43, unchanged from July.
- New orders for manufactured durable goods in August, up four consecutive months, increased $1.3 billion or 0.5 percent to $233.2 billion, up from the previously published 0.4 percent increase. This followed an 11.8 percent July increase. Machinery, also up four consecutive months, led the increase, $0.5 billion or 1.5 percent to $31.2 billion. New orders for manufactured nondurable goods increased $1.9 billion or 0.8 percent to $236.9 billion.
- Shipments of manufactured durable goods in August, down following three consecutive monthly increases, decreased $0.5 billion or 0.2 percent to $244.3 billion, up from the previously published 0.3 percent decrease. This followed a 7.6 percent July increase. Transportation equipment, also down following three consecutive monthly increases, drove the decrease, $1.4 billion or 1.7 percent to $81.6 billion. Shipments of manufactured nondurable goods, up four consecutive months, increased $1.9 billion or 0.8 percent to $236.9 billion. This followed a 1.8 percent July increase. Petroleum and coal products, also up four consecutive months, led the increase, $1.6 billion or 4.2 percent to $39.6 billion.
- Unfilled orders for manufactured durable goods in August, down five of the last six months, decreased $6.2 billion or 0.6 percent to $1,078.6 billion, unchanged from the previously published decrease. This followed a 0.7 percent July decrease. Transportation equipment, down six consecutive months, drove the decrease, $6.8 billion or 0.9 percent to $728.1 billion.
- Inventories of manufactured durable goods in August, down three consecutive months, decreased $0.6 billion or 0.1 percent to $420.4 billion, unchanged from the previously published decrease. This followed a 0.8 percent July decrease. Machinery, down seven of the last eight months, led the decrease, $0.4 billion or 0.6 percent to $69.1 billion. Inventories of manufactured nondurable goods, up three of the last four months, increased $0.8 billion or 0.3 percent to $266.2 billion. This followed a 0.2 percent July decrease. Chemical products, up two of the last three months, led the increase, $0.5 billion or 0.5 percent to $96.9 billion.
To gauge the effect of August factory inventories on 3rd 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 0.1% lower at $243,966 million; the value of work in process inventories was 0.4% higher at $206,258 million, and the value of materials and supplies inventories was 0.4% lower at $144,938 million…the producer price index for August indicated that prices for finished goods were on average 0.1% higher, that prices for intermediate processed goods were 0.6% higher, while prices for unprocessed goods were 7.0% higher….assuming average valuations will be similar for like inventories, we could thus estimate that August’s real finished goods inventories decreased by 0.2%, that real inventories of intermediate processed goods were also 0.2% lower, and that real raw material inventory inventories were roughly 7.4% lower…those real inventory decreases follow July’s factory inventory change, when real inventories were slightly lower … since real NIPA factory inventories were a bit higher in the 2nd quarter, the fact that we’ve had real decreases in aggregate July and August factory inventories would therefore have a corresponding negative impact on the growth rate of 3rd quarter GDP….however, with total business inventories down sharply in the 2nd quarter, the modest negative impact of falling factory inventories is likely to be offset by less severe contraction, or even growth of inventories at the retail and wholesale levels.
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