Written by rjs, MarketWatch 666
November’s consumer and producer prices, October’s business inventories and JOLTS
Major reports released this week included the November Consumer Price Index, the November Producer Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) for October, all from from the Bureau of Labor Statistics, and the October report on Wholesale Trade, Sales and Inventories from the Census Bureau.
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In addition, on Monday the Fed released the Consumer Credit Report for October, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $7.2 billion, or at a 2.1% annual rate, as non-revolving credit expanded at a 4.8% rate to $3,184.6 billion while revolving credit outstanding contracted at a 6.7% rate to $979.6 billion. Meanwhile, this week’s major private report was the Mortgage Monitor for October from Black Knight Financial Services, which indicated that 6.44% of all mortgages were delinquent in October, down from 6.66% in September but up from 3.39% in October of 2019, and that a record low 0.33% of all mortgages were in the foreclosure process, down from the 0.34% that were in foreclosure in September and down from the 0.48% that were in foreclosure a year ago.
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CPI Rose 0.2% in November on Higher Prices for Utilities, Clothing, Appliances, and Transportation Services
The consumer price index rose 0.2% in November, as higher prices for utilities, clothing, household equipment, hotels and transportation services were only partially offset by lower prices for groceries and used vehicles…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that average seasonally adjusted prices were 0.2% higher in November after being unchanged in October, rising by by 0.2% in September, 0.4% in August, by 0.6% in July and by 0.6% in June, after falling by 0.1% in May, falling by 0.8% in April and by 0.4% in March, but after rising by 0.1% in February, by 0.1% in January, by 0.2% in December, and rising by 0.2% last November….the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, actually fell from 260.388 in October to 260.229 in November, which left it statistically 1.1745% higher than the 257.208 reading of October of last year, which is reported as a 1.2% year over year increase, same as the year over year increase reported a month ago….with higher prices for utilities offset by lower prices for groceries, seasonally adjusted core prices, which exclude food and energy, were also 0.2% higher for the month, as the unadjusted core price index rose from 269.328 to 269.473, which left the core index 1.6465% ahead of its year ago reading of 265.108, which is reported as a 1.6% year over year increase, also the same as the year over year core price increase that was reported for October…
The volatile seasonally adjusted energy price index rose 0.4% in November, after rising 0.1% in October, 0.8% in September, 0.9% in August, 2.5% in July, 5.1% in June, but falling by 1.8% in May, by 10.1% in April, 5.8% in March, 2.0% in February and by 0.7% in January, but after rising 1.6% in December, 0.8% in November and by 1.7% last October, but is still 9.4% lower than in November a year ago…the price index for energy commodities was 0.2% lower in November, while the index for energy services was 1.1% higher, after rising 0.8% in October….the energy commodity index was down 0.2% on a 0.4% decrease in the price of gasoline, which was partially offset by a 3.6% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.2% higher…within energy services, the price index for utility gas service rose 3.1% after falling 0.7% in October and is now 4.4% higher than it was a year ago, while the electricity price index rose 0.5% after rising 1.2% in October….energy commodities are still averaging 19.3% lower than their year ago levels, with gasoline prices averaging 19.8% lower than they were a year ago, while the energy services price index is now up 2.3% from last November, as electricity prices are now 1.6% higher than a year ago…
The seasonally adjusted food price index fell 0.1% in November, after rising 0.2% in October, being unchanged in September, rising 0.1% in August, falling 0.4% in July, rising 0.6% in June, 0.7% in May, 1.5% in April, 0.3% in March, 0.4% February, 0.2% January, 0.2% December, 0.1% in November, 0.2% October, 0.2% September, but after being unchanged last June, July & August, as the price index for food purchased for use at home was 0.3% lower in November, after rising 0.1% in October, while the index for food bought to eat away from home was 0.1% higher, as average prices at fast food outlets rose 0.2% and prices at full service restaurants rose 0.3%, while food prices at employee sites and schools averaged 6.4% lower…
In the food at home categories, the price index for cereals and bakery products was 0.5% lower as average bread prices fell 0.5%, the price index for fresh biscuits, rolls, muffins fell 0.7%, the price index for cookies fell 1.7%, and the price index for frozen and refrigerated bakery products, pies, tarts, turnover fell 2.3%….on the other hand, the price index for the meats, poultry, fish, and eggs food group was 0.1% higher as the price index for beef and veal rose 0.1% and egg prices rose 1.0%, while the price indexes for pork and poultry were unchanged…at the same time, the seasonally adjusted index for dairy products was 0.3% higher, as whole milk prices rose 0.6% and the index for ice cream and related products was 0.9% higher….meanwhile, the fruits and vegetables index was unchanged as the price index for fresh fruits rose 0.6% on a 6.7% increase in prices for oranges while the price index for fresh vegetables fell 0.8% on a 5.1% decrease in tomato prices…at the same time, the beverages price index was 0.9% lower as the price index for carbonated drinks fell 1.7% and the price index for coffee fell 1.8%….lastly, the price index for the ‘other foods at home’ category was 0.6% lower, as the price index for butter and margarine fell 2.2%, the price index for snacks fell 0.9%, and the price index for soups fell 1.2%…the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall…since last November, just the price index for uncooked beef roasts, which has risen 11.3%, is the only food line item showing a change greater than 10% over the past year…
Among the seasonally adjusted core components of the CPI, which was 0.2% higher in November after being unchanged in October, after rising by 0.2% in September, 0.4% in August, by 0.6% in July and by 0.2% in June, after falling by 0.1% in May, by 0.4% in April and by 0.1% in March, but after rising by 0.2% in February, 0.2% in January, 0.1% December, and by 0.2% last November, the composite price index of all goods less food and energy goods was 0.1% higher in November, while the more heavily weighted composite for all services less energy services was 0.2% higher….
Among the goods components, which will be used by the Bureau of Economic Analysis to adjust November’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.9% higher as the price index for major appliances rose 3.4% on a 6.1% price increase for laundry equipment, and the price index for furniture and bedding rose 0.8% on a 1.7% increase in the price index for bedroom furniture….at the same time, the apparel price index was also 0.9% higher on a 2.2% increase in the price index for men’s suits, sport coats, and outerwear, a 3.7% increase in the price index for men’s shirts and sweaters, a 2.7% increase in the price index for girls’ apparel, and a 3.5% increase in the price index for infants’ and toddlers’ apparel….on the other hand, the price index for transportation commodities other than fuel was 0.6% lower, as prices for new cars fell 0.1%, prices for used cars and trucks fell 1.3% and the price index for tires fell 0.4%….meanwhile, the price index for medical care commodities 0.3% lower, as prescription drug prices fell 0.1% and the price index for medical equipment and supplies fell 5.3%…however, the recreational commodities index was 0.3% higher on a 1.1% increase in TV prices, a 1.1% increase in the price index for pets, pet supplies, & accessories, a 1.0% increase in the price index for newspapers and magazines, and a 0.7% increase in the price index for sports equipment…at the same time, the education and communication commodities index was 0.4% higher on a 2.2% increase in the price index for computers, peripherals, and smart home assistants and a 4.6% increase in the price index for computer software and accessories….lastly, a separate price index for alcoholic beverages was 0.4% higher, while the price index for ‘other goods’ was up 0.4% on a 2.8% increase in the price index for stationery, stationery supplies, & gift wrap..
Within core services, the price index for shelter was 0.1% higher as rents and homeowner’s equivalent rent were both unchanged, while prices for lodging away from home at hotels and motels rose 4.5%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.3% and other household operation costs were on average 0.4% lower on a 1.1% decrease in domestic services….meanwhile, the price index for medical care services was 0.1% lower, as the price index for eyeglasses and eye care fell 0.5% and the average price of health insurance fell 1.0%… however, the transportation services price index was 1.8% higher as airline fares rose 3.5%, car and truck rentals rose 4.4%, vehicle insurance costs rose 1.1% and the price index for intercity bus fare rose 18.0%…meanwhile, the recreation services price index rose 0.5% as the index for fees for lessons or instructions rose 1.5% and the index for admissions to movies, concerts and sporting events rose 1.8%….at the same time, the index for education and communication services was unchanged as the price index delivery services rose 0.6% while the price index for wireless telephone services fell 0.2%…lastly, the index for other personal services was down 0.3% as the price index for checking accounts and other bank services fell 8.3% and the price index for apparel services other than laundry and dry cleaning was 0.6% lower…
Among core line items, the price index for telephone hardware, calculators, and other consumer information items, which is down by 15.9% since last November, the price index for computer software and accessories, which is down 13.4% year over year, the price index for men’s suits, sport coats, and outerwear, which has fallen 21.4% from a year ago, the price index for women’s dresses, which has fallen by 13.5% in the past year, the price index for medical equipment and supplies which is down by 10.5% from a year ago, the price index for lodging away from home including hotels and motels, which has fallen by 12.7% in the past year, and airline fares, which are now down by 17.0% since last November, have all seen prices drop by more than 10% over the past year, while the cost of Intercity bus fare, which is now up by 13.8% over the past year, the price index for used cars and trucks, which has risen 10.9% from a year ago, the price index for infant’s equipment, which is up by 17.9% year over year, and the price index for major appliances, which is up 17.2% from last November, are the only line items to have increased by a double digit magnitude over that span.
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Producer Prices rose 0.1% in November on Higher Wholesale Food & Energy Prices
The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.1% in November, as prices for finished wholesale goods averaged 0.4% higher while margins of final service providers were on average unchanged….that followed an October report wherein the PPI rose 0.3%, as prices for finished wholesale goods averaged 0.5% higher while margins of final service providers averaged 0.2% higher, a September report that showed the PPI rose 0.4%, as prices for both finished wholesale goods and margins of final service providers averaged 0.4% higher, a now revised August report that indicates the PPI was 0.2% higher, as prices for finished wholesale goods averaged 0.3% higher while margins of final service providers averaged 0.2% higher, and a re-revised July report that now has the PPI 0.6% higher, as prices for finished wholesale goods averaged 0.7% higher while margins of final service providers averaged 0.5% higher….on an unadjusted basis, producer prices are now 0.8% higher than a year ago, up from the 0.5% year over year increase indicated by last month’s report, while the core producer price index, which excludes food, energy and trade services, also rose by 0.1% for the month, and is now 0.9% higher than in November a year ago, up from the 0.8% year over year increase shown in October …
As noted, the price index for final demand for goods, aka ‘finished goods’, was 0.4% higher in November, after being 0.5% higher in October, 0.4% higher in September, 0.3% higher in August, 0.7% higher in July, 0.4% higher in June, 1.5% higher in May, 3.0% lower in April, 1.0% lower in March, 0.9% lower in February, 0.3% higher in January, 0.2% higher in December, and 0.3% higher in November of last year….the finished goods price index rose 0.4% in November because the price index for wholesale energy goods was 1.2% higher, after it had risen by 0.8% in October, fallen by 0.3% in September, risen by a revised 0.7% in August, by 4.6% in July, and by 9.6% in June, and because the price index for wholesale foods rose 0.5%, after rising by 2.4% in October, by 1.2% in September, after being unchanged in August, and rising a revised 0.8% in July, while the index for final demand for core wholesale goods (excluding food and energy) was 0.2% higher, after being unchanged in October, 0.4% higher in September and 0.3% higher in July and August….wholesale energy prices averaged 1.2% higher due to a 8.4% increase in wholesale prices for No.2 diesel fuel, a 6.6% increase in wholesale prices for LP gas, and a 2.7% increase in wholesale prices for residential natural gas, while the wholesale price price of gasoline fell 1.9%…meanwhile, the wholesale food price index rose 0.5% on a 3.0% increase in wholesale prices for dairy products, an 8.8% increase in wholesale prices for pork, a 7.0% increase in wholesale prices for processed young chickens, and a 6.7% increase in the wholesale price index for grains….among wholesale core goods, the wholesale price index for passenger cars rose 0.8%, the wholesale price index for women’s, girls’, and infants’ apparel rose 0.7%, and the wholesale price index for cigarettes rose 1.9% while the wholesale price index for metal forming machine tools fell 3.2% ..
At the same time, the index for final demand for services was unchanged in November, after rising 0.2% in October, 0.4% in September, a revised 0.2% in August, and a revised 0.5% in July, as the index for final demand for trade services fell 0.3% and the index for final demand for transportation and warehousing services fell 0.9%, while the core index for final demand for services less trade, transportation, and warehousing services was 0.2% higher… among trade services, seasonally adjusted margins for TV, video, and photographic equipment and supplies retailers fell 25.5%, margins for RVs, trailers, and campers retailers fell 15.4%, margins for hardware, building materials, and supplies retailers fell 6.7%, and margins for fuels and lubricants retailers fell 8.2%… among transportation and warehousing services, average margins for airline passenger services fell 7.1% while average margins for truck transportation of freight rose 1.6%…among the components of the core final demand for services index, the index for arrangement of flights (partial) rose 6.7%, the index for advertising space sales in periodicals, newspapers, directories, and mailing lists rose 1.3%, margins for hospital outpatient care rose 1.0%, while margins for arrangement of cruises and tours fell 9.6%…
This report also showed the price index for intermediate processed goods rose 1.4% in November, after rising 0.3% in October, 1.0% in September, 0.6% in August, 1.4% in July, and 1.3% in June, but after being unchanged in May and falling the prior 5 months….the price index for intermediate energy goods rose 6.0%, as producer prices for natural gas sold to electric utilities rose 61.8% and producer prices for natural gas sold to industry rose 10.5%, while refinery prices for gasoline fell 1.9%… meanwhile, the price index for intermediate processed foods and feeds rose 2.8%, as the producer price index for processed poultry rose 4.6%, the producer price index for meats rose 3.4% and the producer price index for prepared animal feeds rose 4.1%…at the same time, the core price index for intermediate processed goods less food and energy rose 0.1% as the producer price index for secondary nonferrous metals rose 7.8%, the producer price index for phosphates rose 4.4%, and the producer price index for hardwood lumber rose 4.5%, while the producer price index for softwood lumber fell 17.8%…however, prices for intermediate processed goods are still 0.3% lower than in November a year ago, the 19th consecutive year over year decrease, following 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as prices for intermediate goods fell every month from July 2015 through March 2016….
Meanwhile, the price index for intermediate unprocessed goods rose 7.3% in November, after rising 2.6% in October, 3.9% in September, rising a revised 4.0% in August and a revised 1.0% in July, and rising 5.1% in June and 8.6% in May, but after falling 12.6% in April and 8.5% in March….that was as the November price index for crude energy goods rose 16.5% as crude oil prices rose 0.5% while unprocessed natural gas prices rose 48.9%, and as the price index for unprocessed foodstuffs and feedstuffs rose 3.9% on an 18.5% jump in the price of raw milk, an 11.2% increase in the price of alfalfa hay, and a 7.0% increase in the price of unprocessed corn…at the same time, the index for core raw materials other than food and energy materials rose 2.3%, as producer prices for hides and skins rose 26.0%, the producer price index for nonferrous metal ores rose 8.7%, and raw cotton prices rose 4.4%… this raw materials index is now 0.6% higher than a year ago, the first annual increase in almost 2 years, as the year over year change on this index had been negative since the beginning of 2019…
Lastly, the price index for services for intermediate demand fell 0.1% in November, after rising 0.8% in October, 1.0% in September, 0.7% in August, a revised 0.4% in July, and 0.3% in June, after falling revised 0.3% in May, and falling 1.7% in April…the price index for intermediate trade services was 0.4% higher, as margins for intermediate chemicals and allied products wholesalers rose 2.3% and margins for intermediate machinery and equipment parts and supplies wholesalers rose 4.4%…meanwhile, the index for transportation and warehousing services for intermediate demand was 0.5% lower, as the intermediate price index for arrangement of freight and cargo fell 7.9% and the intermediate price index for transportation of passengers (partial) fell 6.9%…at the same time, the core price index for intermediate services less trade, transportation, and warehousing was unchanged, as the intermediate price index for investment banking rose 4.1% and the intermediate price index for truck, utility trailer, and RV rental and leasing rose 2.9% while the intermediate price index for securities brokerage, dealing, investment advice, and related services fell 2.3% and the intermediate price index for permanent job placement services fell 1.6%…over the 12 months ended in November, the year over year price index for services for intermediate demand is still 1.6% higher than it was a year ago, the third positive annual change since it turned negative year over year in April for the first time in the history of this index.
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Job Openings and Firing Increase in October, Hiring Decreases, Job Quitting Little Changed
The Job Openings and Labor Turnover Survey (JOLTS) report for October from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 158,000, from 6,494,000 openings in September to 6,652,000 in October, after September job openings were revised 58,000 higher, from 6,436,000 to 6,494,000….however, October’s jobs openings were still 9.0% lower than the 7,309,000 job openings reported in October a year ago, as the job opening ratio expressed as a percentage of the employed rose to 4.5% in October from 4.4% September, while it was down from 4.6% in October a year ago…among the largest gains, job openings in health care and social assistance increased from 1,110,000 to 1,232,000, while job openings in the finance and insurance sector fell from 240,000 to 211,000 (see table 1 for more details)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated tables for the data cited, which are linked to 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 October, seasonally adjusted new hires totaled 5,812,000, down by 64,000 from the revised 5,886,000 who were hired or rehired in September, as the hiring rate as a percentage of all employed fell to 4.1% from 4.2% in September, but was up from from 3.8% hiring rate in October a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations rose by 263,000, from 4,844,000 in September to 5,107,000 in October, while the separations rate as a percentage of the employed rose to 3.6%, up from 3.4% in September but down from 3.7% in October a year ago (see table 3)…subtracting the 5,107,000 total separations from the total hires of 5,812,000 would imply an increase of 705,000 jobs in October, more than the revised payroll job increase of 610,000 for October reported in the November establishment survey of last week, but still within the expected +/-115,000 margin of error for these reports….
Breaking down the seasonally adjusted job separations, the BLS finds that 3,092,000 of us voluntarily quit our jobs in October, up by 18,000 from the 3,074,000 who quit their jobs in September, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.2% of total employment, which was down from the 2.3% quits rate of a year earlier (see details in table 4)….in addition to those who quit, another 1,680,000 were either laid off, fired or otherwise discharged in October, up by 243,000 from the revised 1,437,000 who were discharged in September, as the discharges rate rose from 1.0% to 1.2% of all those who were employed during the month, same as the discharges rate of 1.2% a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 336,000 in October, up from 333,000 in September, for an ‘other separations rate’ of 0.2%, which was unchanged from September and from October of last year….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 by using the links to tables at the bottom of the press release.
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October Wholesale Sales Up 1.8%, Wholesale Inventories Up 1.1%
The October report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at “$496.6 billion, up 1.8 percent (±0.4 percent) from the revised September level and up 0.9 percent (±0.7 percent) from the revised October 2019 level. September’s sales were revised from the $486.0 billion reported last month to $487.7 billion and hence The August 2020 to September 2020 percent change was revised from the preliminary estimate of up 0.1 percent (±0.4 percent)* to up 0.4 percent (±0.4 percent)*.” …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 produced or finally sold..
On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this October report estimated that wholesale inventories were valued at a seasonally adjusted “$649.0 billion at the end of October, up 1.1 percent (±0.4 percent) from the revised September level. Total inventories were down 2.2 percent (±0.9 percent) from the revised October 2019 level.” they also report that “The September 2020 to October 2020 percent change was revised from the advance estimate of up 0.9 percent (±0.4 percent) to up 1.1 percent (±0.4 percent). to up 0.1 percent (±0.4 percent)*.” in reference to the sketchy Advance Report on Wholesale and Retail Inventories, which was released before the release of 3rd quarter GDP revisions…September inventories are now shown to be at $641,649 million, revised from the wholesale inventory figure of $638.5 billion reported a month ago…
To estimate the effect of October wholesale inventories on 4th quarter GDP, we must first adjust them for changes in price with appropriate components of the producer price index…although details are not broken out, we’ve previously estimated that more than 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories…meanwhile, the producer price index for October indicated that prices for finished goods rose an average of 0.5%, that prices for intermediate processed goods were on average 2.2% higher, and that prices for unprocessed goods were 2.6% higher….hence the 1.1% increase in the nominal value of wholesale inventories suggests an increase of around 0.4% or 0.5% in real terms…since real wholesale inventories in the 3rd quarter were down sharply, any increase in real wholesale inventories in the 4th quarter would thus add to the growth of 4th quarter GDP by first reversing the 3rd quarter decline, and then by incrementing that with the magnitude of the 4th quarter increase.
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