a brief synopsis of the past week's economic reports...
the economic releases of the past week included the first two major reports on May data, on retail sales from the Census Bureau, and the producer price index from the Bureau of Labor Statistics....the week also saw the release of our last important reports on April data, the April wholesale trade and April business inventories reports, both from the Census, and the April Job Openings and Labor Turnover Survey (JOLTS), which showed a record number of job openings in the month before last...the BLS also released the May import and export price indexes, which showed import prices increased 1.3% and export prices increased 0.6%, and which will be used to deflate May trade data when that report is released...quarterly reports included the 1st quarter Flow of Funds Accounts from the Federal Reserve, which showed that US household net worth increased from $83.3 billion in the 4th quarter to $84.9 trillion in this report, as the value of equities increased by $487 billion and the value of real estate rose $503 billion, and the first quarter Quarterly Services Report from the Census Bureau, which showed outlays for health care and other services was greater than was estimated by the BEA, implying an upward revision to 1st quarter GDP…in addition, we also saw the release of the Mortgage Monitor for April (pdf) from Black Knight Financial Services, which we'll also look at briefly today..
Retail Sales Increase 1.2% in May; March and April Sales Revised Up
seasonally adjusted retail sales increased in May, and revisions turned April sales positive and made March the strongest report in five years...the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $444.9 billion for the month, which was an increase of 1.2 percent (±0.5%) from the revised April sales of $439.6 billion, and 2.7 percent (±0.9%) above the seasonally adjusted sales in May of last year...April's sales were revised up from $436.8 billion to $439.6 billion, an increase of 0.2% over March, while the March increase over February was revised from a 1.1% gain over February to a 1.5% increase, the largest one month jump in five years...hence, we can expect an upward revision to 1st quarter real PCE, and a positive contribution to GDP from April consumer goods....estimated unadjusted sales in May, extrapolated from surveys of a small sampling of retailers, indicated actual sales rose 5.9%, from $437,250 million in April to $463,124 million in May, while they were up just 1.0% from the $458,705 million of sales in May a year ago, so seasonal adjustments were a factor in this report...
we'll again include the table of monthly and yearly percentage changes in sales by business type taken from the Census pdf, which shows more than we could explain in a few paragraphs.....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business type from April to May in the first sub-column, and then the year over year percentage change for those businesses since last May in the 2nd column; the second pair of columns gives us the revision of last month’s April advance monthly percentage change estimates (now called "preliminary") as revised in this report, likewise for each business type, with the March to April change under "Mar 2015 revised" and the revised April 2014 to April 2015 percentage change in the last column shown...for reference, here is what those April percentage changes looked like before this month's revision....
as you can see, every retail business type except drug stores, where sales were off 0.3%, saw an increase in sales in May, with a 2.0% increase to $93,024 million in sales by vehicle and parts dealers underpinning the May sales jump...but even without automotive sales, retail sales still rose by 1.0%, with gas stations, building material and garden supply stores, clothing stores and online (non-store) retailers all seeing sales gains of greater than 1%....although we can't determine how much real sales increased until we get the consumer price data next week, we would suggest that the 3.7% increase in gas station sales was price driven, as market prices for gasoline averaged roughly 5% more in May than in April...
comparing the third column above to our copy of April sales as originally reported last month, we find that the major change driving the revision to April sales was the revision of sales at vehicle and parts dealers, which had been reported as 0.4% lower in the advance report and have now been revised to a 0.7% increase; the 0.1% increase in all other April sales excluding automotive sales was statistically unchanged from the original estimate....other major positive revisions to April include furniture store sales, which were originally reported as 0.9% lower and are now seen to have increased 1.4%, drug stores, where the originally reported 0.4% April sales decrease was revised to an 0.8% increase, restaurant and bars, where the sales increase was revised from 0.7% to 1.1%, and miscellaneous store sales, which were originally reported as unchanged and are now showing a 1.7% increase...on the other hand, sales at building material and garden supply stores, which had been reported up 0.3%, are now shown to have decreased 0.4%, and April department store sales, which were revised from a 2.2% decrease to an even greater 2.9% decline from March...
May Producer Prices Rise 0.5% on Higher Energy
wholesale prices saw their largest increase since September 2012 in May as the seasonally adjusted May Producer Price Index(PPI) for Final Demand showed a 0.5% increase, as final demand for wholesale goods rose by 1.3% while final demand for services increased was unchanged, following a 0.4% decrease in the April PPI, when prices for every component except core services was lower...the year over year change in producer prices remains in negative territory, however, as the annual change inched up from a record low negative 1.3% in April to a negative 1.1% in May....
the index for final demand for goods, aka 'finished goods', rose by 1.3% after falling by 0.7% in April and falling 9 out of the last 10 months, as the index for energy prices rose by 5.9% as wholesale gasoline prices rose 17.0% and wholesale diesel fuel prices rose 18.8% while wholesale residential gas fell 1.6% (see table 4)...the price index for final demand for foods was 0.8% higher, as wholesale egg prices rose by 42.9% on the loss of egg-laying hens to the avian flu while other wholesale food prices were mixed (see table 4)...excluding food and energy, the index for final demand for wholesale core goods rose by 0.2% in May, as a 1.2% increase in wholesale drug prices was the only core price change greater than 1%...
as noted, the index for final demand for services was unchanged in May after falling by 0.1% in April and 0.6% year to date, as the margins for final demand for trade services rose by 0.6% while the index for final demand for transportation and warehousing services slipped 0.1% and the index for final demand for services less trade, transportation, and warehousing services was off 0.2%...the largest increase among final demand for services was a 28.0% increase in margins for TV, video, and photographic equipment and supplies retailing, while margins for major household appliances retailing fell 7.1% in the greatest decrease this month...
this report also showed the price index for processed goods for intermediate demand rose by 1.0% in May after 9 consecutive monthly price declines, which still left intermediate processed goods 7.0% lower priced than a year ago....the May increase was driven by a 5.8% jump in prices for intermediate energy goods, while the index for processed foods and feeds rose 0.5% and the price index for processed goods for intermediate demand less food and energy fell 0.2%...furthermore, the price index for intermediate unprocessed goods rose by 3.3% after rising 0.9% in April, on a 7.7% increase in the price of crude energy materials and a 1.1% increase in the index for unprocessed foodstuffs and feedstuffs, while the index for other raw materials fell 0.1%…nonetheless, this raw materials index still remains 23.3% lower than a year ago, as it saw prices fall 10 out of the 11 months prior to April, only eking out a 0.1% increase in September of last year...
finally, the price index for services for intermediate demand fell by 0.5% in May, reversing the April increase, as a 0.6% increase in the index for trade services for intermediate demand and a 0.1% increase in the index for transportation and warehousing for intermediate demand was offset by a 0.8% decrease in prices for intermediate services less trade, transportation, and warehousing...over the 12 months ended in May, the price index for services for intermediate demand has risen 1.3%...
Wholesale Sales Up 1.6% in April; Inventories Rise 0.4%
after four months of lower sales, largely due to lower prices, the April Wholesale Trade, Sales and Inventories Report(pdf) from the Census Bureau estimated that seasonally adjusted wholesale sales were at $448.3 billion, increasing 1.6 percent (+-0.7) from the revised March level, while they still remained 3.3 percent (+-1.4%) lower than wholesale sales of a year earlier...the March preliminary estimate was revised downward by $0.6 billion or a tenth of a percent...wholesale sales of durable goods rose 1.2 percent (+-0.7%) in April after an increase of 0.9% in March and were 2.4 percent (+-1.6%) higher than a year earlier, with both automotive and electrical and electronic goods sales 3.2% higher than in March....wholesale sales of nondurable goods rose 2.0 percent (+-0.7%) after a decrease of 1.4% in March and were 8.2 percent (+-1.6%) lower than last April. with wholesale sales of farm products up 7.4% and wholesale sales of petroleum and petroleum products up 4.9% on the month...swings in sales of non-durables goods are often due to price changes, as food, farm and oil products account for nearly half of the non durable goods covered by this report; note, however, that the April producer price index was 0.4% lower, with wholesale foods down 0.9% and wholesale energy down 2.9%, so the real increase in April sales was actually greater than the nominal sales increase shown by this report...
the same is true for the increase in seasonally adjusted April wholesale inventories, which were estimated to be valued at $576.9 billion at month end, an increase of 0.4 percent (+-0.4%) from the revised March level and 4.5 percent (+-1.4%) higher than April a year ago, with a March upward revision of $0.2 billion or less than 0.1%...April inventories of durable goods were up 0.1 percent (+-0.4%) from March and were up 6.6 percent (+-1.6%) from a year earlier, with increases in automotive, lumber, hardware and machinery inventories offsetting lower wholesale inventories of computers and peripheral equipment, professional equipment, metals, and electrical and electronic goods... the value of wholesale inventories of nondurable goods were up 0.8% (+-0.5%) from March and up 1.1 percent (+-1.6%) from last April, as inventories of paper and paper products increased 3.9% while the value of inventories of farm products fell by 4.4%...the widely watched inventory to sales ratio fell from 1.30 to 1.29, while it was up from 1.19 a year ago, a metric now distorted by lower prices for petroleum products, which have sales three times greater than what is inventoried...
Business Inventories Rise 0.4% as Sales Rise 0.6%
following the release of retail sales report, Census released the composite Manufacturing and Trade Inventories and Sales report for April, incorporating the revised April retail data, the wholesale data we just looked at, and the full factory orders report of last week, to give us a complete picture of the business contribution to the economy...according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,318.8 billion at the end of April, 0.6 percent (±0.2%) higher than March revised sales, but down 2.3 percent (±0.5%) from April a year earlier...total March sales were revised up 0.2% to $1,311,121 million, 0.6% higher than February...manufacturer's sales slipped by a statistically insignificant $4 million to $482,428 million, retail trade sales, which exclude bar & restaurant sales from the retail sales reported earlier, rose by 0.1% to $388,156 million, and wholesale sales rose by 1.6% to $448,251 million..
meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be at a seasonally adjusted $1,793.2 billion at the end of April, 0.4 percent (±0.1%) higher than March and up 2.6 percent (±0.5%) from April a year earlier...seasonally adjusted inventories of manufacturers were estimated to be valued 0.1% higher at $648,988 million, inventories of retailers were estimated to be 0.8% higher and valued at $567,330 million, and inventories of wholesalers were estimated to be valued at $576,886 million at the end of April, up 0.4% from March...as we mentioned, real wholesale inventories, deflated with the negative 0.4% April producer price index, will likely be quite higher, and as we noted last week, so will real factory inventories...retail inventories, on the other hand, will be deflated with goods components of the April CPI, which averaged a 0.1% increase...together, these all suggest a large real inventory build for April that will add to 2nd quarter GDP...the increase in April retail inventories in particular also seems to explain where the March increase in imports went to; while those imports subtracted from 1st quarter GDP, they will add to the 2nd quarter increase to the extent that they are included here...
Job Openings at a Record High in April; Hiring and Firing Falls
the April report on job opening was noteworthy in that the number of job openings reported by private business and government agencies was the highest since the labor departments started tracking them in December 2000....the April Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 267,000 to 5,376,000 at the month end, up from 4,417,000 job openings in April a year ago....job openings as a percentage of the employed labor force rose to 3.7% from 3.5% in March and 3.1% a year ago...the increase in openings was entirely in service industries, as job openings in health care and social assistance rose by 100,000 to while openings in construction and manufacturing fell (see table 1) ...
this 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 April, seasonally adjusted new hires totaled 5,007,000, down 71,000 from the 5,088,000 hired or rehired in March, as the hiring rate as a percentage of all employed remained slipped from 3.6% to 3.5%, the same hiring rate as in April a year earlier (details by industry are in table 2).....total separations also fell, from 5,065,000 in March to 4,881,000 in April, as the separations rate as a percentage of the employed also fell from 3.6% to 3.5%, while it was up from 3.3% a year ago (see table 3)...subtracting the 4,881,000 total separations from the total hires of 5,007,000 would imply an increase of 126,000 jobs in April, 95,000 less than the revised payroll job increase of 221,000 for April reported by the BLS establishment survey last week, a difference not outside of the margin of error for either survey...
breaking down the seasonally adjusted job separations, the BLS finds that 2,669,000 quit their jobs in April, down 100,000 from the revised 2,769,000 who quit their jobs in February, while the quits rate, a widely watched as an indicator of worker confidence, fell from 2.0% to 1.9% of total employment (see table 4)....in addition to those who quit, another 1,817,000 were either laid off, fired or otherwise discharged in April, down from the 1,894,000 discharges in March, while the discharges rate remained unchanged at 1.3% of all those who were employed during the month....meanwhile, other separations, which includes retirement and death, were at 395,000 in April, down from 403,000 in March, 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...
April Mortgage Delinquencies Rise 1.5%; Foreclosure Inventory Falls 2.4%
the Mortgage Monitor for April (pdf) from Black Knight Financial Services (BKFS, formerly LPS Data & Analytics) reported that there were 763,531 home mortgages, or 1.51% of all mortgages outstanding, remaining in the foreclosure process at the end of April, which was down from 782,155, or 1.55% of all active loans that were in foreclosure at the end of March, and down from 2.02% of all mortgages that were in foreclosure in April of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and the April "foreclosure inventory" remains the lowest percentage of homes that were in the foreclosure process since late 2007... new foreclosure starts fell to 73,547 from 94,138 in March and from 78,796 in April of 2014, and it’s a metric which has been volatile but which is now the lowest count of new foreclosures since late 2005, and hence is approaching normal...
in addition to homes in foreclosure, March BKFS data showed that 2,415,455 mortgages, or 4.77% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure, up from 4.70% of homeowners with a mortgage who were more than 30 days behind in March, but down from the mortgage delinquency rate of 5.62% a year earlier...of those who were delinquent in March, 952,481 home owners, or 1.88% of those with a mortgage, were considered seriously delinquent, which means they were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month...hence, a total of 6.28% of homeowners with a mortgage were either late in paying or in foreclosure at the end of April, and 3.39% of them were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...
the first graph below, from page 8 of the mortgage monitor, shows the historical percentage of seriously delinquent or foreclosed homes nationally and for three states monthly for the period between 2005 and the present...the solid black line shows the percentage of such mortgages nationally over that span, which is currently 3.39% and rounded to 3.4% on the graph; the dashed line is the average percentage of of seriously delinquent or in foreclosure mortgages for judicial states, where a court adjudication is necessary for a foreclosure to be completed, now at 4.7% of all judicial state mortgage...then we have the same metric tracked for Florida in green, New Jersey in red, and New York in blue, 3 states which as noted together currently account for 28% of all mortgages that are in serious trouble nationally...as of April, 7.9% percent of all Jersey mortgages were in trouble and 5.1% of them were in foreclosure, a national high; New York still has 6.3% of its mortgaged homeowners in serious trouble, with an 'in foreclosure' percentage of 3.9%, and the seriously troubled mortgages in Florida are now down to 5.6% of their total, with 3.1% of Florida mortgages in foreclosure...in the track of the green line, you can see the long period between 2009 and 2012 when Florida led the nation in troubled mortgages, a period when total delinquencies and foreclosures in Florida consistently amounted to more than 20% of all mortgages in the state..
the next graph, as its heading indicates, shows the current foreclosure pipeline ratio for several states, with the ratio for select judicial states shown in blue and the pipeline ratio for select non-judicial states shown in red...you might recall that the pipeline ratio is a mortgage industry metric indicating how many months the average troubled home loan would remain in the foreclosure process in each state based on recent records, and it is computed by adding those homes that are seriously delinquent to those already in foreclosure and dividing that sum by the average number of completed foreclosures per month in each state over the previous 6 months....what that results in is the average number of months a problem home loan would be in the "foreclosure pipeline" at the current pace of foreclosure in each state, before the foreclosure process on all seriously delinquent homes in that state would be completed....the graph below, from page 9 of the Mortgage Monitor, shows the number of years it would take for the foreclosure backlog to clear in the states with the largest and smallest pipeline ratios for both judicial and non-judicial states...you see that it's a non-judicial state, Massachusetts, which has the longest foreclosure pipeline at 18.9 years at this time; that's because the state's foreclosure prevention law has slowed foreclosures to a snail's pace (the District of Columbia is an odd outlier because they're only completing an average of 10 foreclosures a month; hence, with 5,000 mortgages in trouble, it would take them 43.3 years to clear the backlog at that pace)....on the judicial side of the chart, New York has the longest pipeline ratio at 12.7 years, as their courts are backed up with 6.3% of mortgages in serious trouble; even so, they are now processing foreclosures much faster than in 2011, when both New York and New Jersey saw foreclosure backlogs that would take over 50 years to clear...on the other end of the scale, Florida at 2.9 years now has the lowest pipeline ratio of the judicial states, despite their high percentage of mortgages in trouble; that's because the state has used foreclosure fraud settlement funds to hire retired judges solely for the purpose of steamrolling as many delinquent homeowners in as short as time as possible...
there are many more such graphics in the April Mortgage Monitor (pdf)...