September’s trade deficit, factory orders, and wholesale sales

Economic reports released last week included the Commerce Department's report on our International Trade for September, and the Full Report on Manufacturers’ Shipments, Inventories and Orders for September, and the September report on Wholesale Trade, Sales and Inventories, both from the Census Bureau….

The week also saw the Consumer Credit Report for September from the Fed, which reports on non-real estate consumer borrowing, and which indicated consumer credit outstanding grew by a seasonally adjusted $6.0 billion in June, or at a 1.4% annual rate, as non-revolving credit grew at an 1.6% rate to $3,745.4 billion, while revolving credit outstanding grew at a 0.9% rate to $1,357.6 billion…during the third quarter, consumer credit increased at a seasonally adjusted 3.2% rate, as revolving credit increased at a 2.8% annual rate, while nonrevolving credit increased at an 3.4% annual rate….

Privately issued reports included the widely followed service industry purchasing manager’s survey from the Institute for Supply Management (ISM): the October 2024 Services Report On Business reported their Services PMI rose to 56.0%, up from 54.9% in September and the highest reading since July 2022, indicating a larger plurality of service industry purchasing managers reported improvement in various facets of their business in October than the month before, and the Mortgage Monitor for November, which now comes from the Mortgage Technology unit of ICE, and which indicated that 3.48% of all mortgages were delinquent in September, up from the 3.34% of mortgages that were delinquent in August, and up from the 3.21% mortgage delinquency rate of September 2023, and that 0.35% of all mortgages were in the foreclosure process in September, unchanged from the 0.35% of mortgages in foreclosure in August, but down from the 0.40% foreclosure rate of September a year ago….the full Mortgage Monitor for November (pdf), which covers September data, is a comprehensive 22 pages of tables and graphics, with explanatory text…

September Trade Deficit Rose 19.2% on Higher Imports and Lower Exports

Our trade deficit rose 19.2% to a 2-1/2-year high in September as the value of our exports fell while the value of our imports increased…the Commerce Dept report on our international trade in goods and services for September indicated that our seasonally adjusted goods and services trade deficit rose by a rounded $13.6 billion to $84.4 billion in September, from a revised August trade deficit of $70.8 billion, which had previously been reported at $70.4 billion…the value of our exports fell by a rounded $3.2 billion to $267.9 billion, on a $3.2 billion decrease to $176.0 billion in our exports of goods, and a decrease of less than $0.1 billion to $91.9 billion in our exports of services, while our imports rose by a rounded $10.3 billion to $352.3 billion, on a $10.9 billion increase to $285.0 billion in our imports of goods, which was partly offset by a $0.6 billion decrease to $67.3 billion in our imports of services… prices for our exports averaged 0.7% lower in September, so part of the decrease in the value of this month’s exports was due to lower prices, and real exports likely only fell by about 0.5%, while import prices were 0.4% lower, meaning that our real imports were greater than the nominal change reported here by that percentage, or that real imports probably rose about 3.4%…

The decrease in our exports of goods in September was due to lower exports of capital goods, of consumer goods, and of industrial supplies and materials, while our exports of other end use goods increased…. referencing the Full Release and Tables for September (pdf), in Exhibit 7 we find that our exports of capital goods fell by $1,892 million to $55,874 million as a $1,671 million decrease in our exports of civilian aircraft, a $619 million decrease in our exports of semiconductors, and a $431 million decrease in our exports of telecommunications equipment were partly offset by a $318 million increase in our exports of electric apparatuses, and that our exports of consumer goods fell by $1,436 million to $22,859 million due to a $2,018 million decrease in our exports of pharmaceuticals, which was partly offset by a $432 million increase in our exports of gem diamonds…in addition, our exports of industrial supplies and materials fell by $1,408 million to $59,828 million on a $1290 million decrease in our exports of crude oil, a $483 million decrease in our exports of petroleum products other than fuel oil, and a $313 million decrease in our exports of non-monetary gold…. partly offsetting the decreases in those end-use categories, our exports of foods, feeds and beverages rose by $673 million to $14,078 million on a $434 million increase in our exports of soybeans, our exports of automotive vehicles, parts, and engines rose by $519 million to $14,773 million on increased exports of passenger cars, trucks, buses, and special purpose vehicles, and our exports of other goods not categorized by end use rose by $41 million to $8,429 million…

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and shows that higher imports of consumer goods, capital goods, industrial supplies and materials, and automotive products, were all major contributors to September’s $10.9 billion increase in our imports of goods….our imports of consumer goods rose by $4,019 million to $71,050 million, led by a $1,874 million increase in our imports of pharmaceuticals and a $377 million increase in our imports of cotton apparel and cotton household goods, while our imports of capital goods rose by $2,809 million to $86,226 million as a $1,019 million increase in our imports of computers, a $790 million increase in our imports of semiconductors, a $583 million increase in our imports of electric apparatuses, and a $458 million increase in our imports of telecommunications equipment were partly offset by a $375 million decrease in our imports of computer accessories and a $300 million decrease in our imports of civilian aircraft…in addition, our imports of industrial supplies and materials rose by $2,214 million to $55,956 million as a $745 million increase in our imports of non-monetary gold, a $593 million increase in our imports of finished metal shapes, and a $405 million increase in our imports of crude oil were partly offset by a $386 million decrease in our imports of fuel oil and a $403 million decrease in our imports of of petroleum products other than fuel oil, while our imports of automotive vehicles, parts and engines rose by $1,184 million to $39,638 million on a $868 million increase in our imports of passenger cars and our imports of our imports of foods, feeds, and beverages rose by $847 million to $18,778 million on increased imports of fruits and juices, fish and shellfish, and other foods…slightly offsetting the increases in those end-use categories, our imports of other goods not categorized by end use fell by $117 million to $11,369 million….

The News Release for this month’s report also summarizes Exhibit 19 in the full release, which gives us surplus and deficit details on our goods trade with selected countries:

The September figures show surpluses, in billions of dollars, with South and Central America ($3.5), Netherlands ($3.2), Hong Kong ($2.2), United Kingdom ($1.4), Australia ($1.4), Singapore ($1.3), Brazil ($1.1), and Belgium ($0.3). Deficits were recorded, in billions of dollars, with China ($26.9), European Union ($23.8), Mexico ($16.0), Vietnam ($12.2), Ireland ($9.3), Taiwan ($7.0), Germany ($7.0), Canada ($5.7), South Korea ($5.7), Japan ($5.3), India ($3.4), Italy ($3.4), Switzerland ($2.3), Malaysia ($2.1), France ($1.1), Israel ($0.8), and Saudi Arabia ($0.2).

• The deficit with the European Union increased $4.7 billion to $23.8 billion in September. Exports decreased $2.1 billion to $30.6 billion and imports increased $2.6 billion to $54.4 billion.
• The deficit with Vietnam increased $2.5 billion to $12.2 billion in September. Exports increased $0.1 billion to $1.1 billion and imports increased $2.6 billion to $13.3 billion.
• The surplus with the United Kingdom increased $1.1 billion to $1.4 billion in September. Exports increased $0.6 billion to $7.1 billion and imports decreased $0.5 billion to $5.7 billion.

In last week's advance report on 3rd quarter GDP, the contribution to GDP from September’s trade in goods was estimated based on the sketchy Advance Report on our International Trade in Goods which was released a day before the GDP release…that report estimated that our seasonal adjusted September goods trade deficit was at $108,226 million on a Census basis, up from the $94,218 million goods deficit in August, on goods exports valued at $174,187 million and goods imports valued at $282,414 million…Exhibit 5 in this report revises that estimate and shows that our actual goods trade deficit in September was $108,985 billion on a balance of payments basis, and $108,694 million on a Census basis, on Census adjusted goods exports of $174,323 million and Census adjusted goods imports of $283,017 million…in addition, the Census basis August goods trade deficit was revised from $94,218 million to $94,237 million…together, those revisions from the previously published data mean that the 3rd quarter trade deficit in goods was on the order of $487 million more than was included in last week’s GDP report, or roughly $1.95 billion on an annualized basis, which would mean that the 3rd quarter’s GDP should be revised about about 0.03 percentage points lower when the 2nd estimate of GDP is released at the end of November…

For our trade in services, the BEA’s Key source data and assumptions (xls) for the advance estimate of third quarter GDP provides aggregate exports and imports of services at annual rates on an international-transactions-accounts basis, indicating that the BEA assumed a $10.0 billion decrease in exports of services and a $6.9 billion decrease in imports of services on an annual basis in September when computing 3rd quarter GDP…while there is no comparable annualized metric or adjusted data in this trade report that we could directly compare that to, this release does show that exports of services decreased by less than $0.1 billion in September after August’s exports of services were revised $0.4 billion lower, and that imports of services decreased $0.6 billion in September after August’s imports of services were revised less than $0.1 billion higher…after multiplying those monthly figures by 12 to crudely approximate an annualized change, that suggests that the annual rate for September exports of services used in the GDP report was on the order of $4.0 billion too low, while the annual rate for September imports of services used in the GDP report was about $0.9 billion too low…applying those annualized differences, and also crudely annualizing the services trade revisions for August vis a vis those reported in the GDP report in the same manner, the annual rate for 3rd quarter services exports would be revised about $0.8 billion lower, while the revision in the annual rate for 3rd quarter services imports would be negligible, as the downward revision to September would be offset by a nearly equal upward revision to August…combined, the resulting downward revision of $0.8 billion to our total services surplus in NIPA terms would subtract about 0.01 percentage point from 3rd quarter GDP….combined with our underestimated goods deficit, then, it appears that this report would subtract about 0.04 percentage points from 3rd quarter GDP when the 2nd estimate revisions are released on November 29th…

Factory Shipments Down 0.4% in September, Factory Inventories Down 0.2%

The Full Report on Manufacturers’ Shipments, Inventories, & Orders​ (pdf) for September from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $2.​8 billion or 0​.​5 percent to $584.2 billion in September, following a decrease of 0.8% to $587.0 billion in August, which was revised from the 0.2% decrease $590.4 billion that was reported for August 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 useful as revised updates to the September advance report on durable goods we reported on two weeks ago…on those durable goods 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 September, down four of the last five months, decreased $2.8 billion or 0.5 percent to $584.2 billion, the U.S. Census Bureau reported today. This followed a 0.8 percent August decrease. Shipments, down two consecutive months, decreased $2.2 billion or 0.4 percent to $586.9 billion. This followed a 0.7 percent August decrease. Unfilled orders, up forty-nine of the last fifty months, increased $2.1 billion or 0.2 percent to $1,391.0 billion. This followed a 0.2 percent August increase. The unfilled orders-to-shipments ratio was 6.94, up from 6.86 in August. Inventories, down following two consecutive monthly increases, decreased $1.9 billion or 0.2 percent to $858.1 billion. This followed a 0.1 percent August increase. The inventories-to-shipments ratio was 1.46, unchanged from August.
• New Orders for manufactured durable goods in September, down three of the last four months, decreased $2.1 billion or 0.7 percent to $284.8 billion, up from the previously published 0.8 percent decrease. This followed a 0.9 percent August decrease. Transportation equipment, also down three of the last four months, drove the decrease, $3.1 billion or 3.1 percent to $95.4 billion. New orders for manufactured nondurable goods decreased $0.7 billion or 0.2 percent to $299.4 billion.
• Shipments of manufactured durable goods in September, down two consecutive months, decreased $1.6 billion or 0.5 percent to $287.5 billion, up from the previously published 0.6 percent decrease. This followed a 0.6 percent August decrease. Transportation equipment, also down two consecutive months, drove the decrease, $2.3 billion or 2.4 percent to $94.4 billion. Shipments of manufactured nondurable goods, down two consecutive months, decreased $0.7 billion or 0.2 percent to $299.4 billion. This followed a 0.7 percent August decrease. Petroleum and coal products, down four of the last five months, drove the decrease, $1.0 billion or 1.6 percent to $61.5 billion. \
• Unfilled Orders for manufactured durable goods in September, up forty-nine of the last fifty months, increased $2.1 billion or 0.2 percent to $1,391.0 billion, unchanged from the previously published increase. This followed a 0.2 percent August increase. Transportation equipment, up forty-four of the last forty-five months, led the increase, $1.0 billion or 0.1 percent to $895.0 billion.
• Inventories of manufactured durable goods in September, down three of the last four months, decreased $1.0 billion or 0.2 percent to $528.1 billion, unchanged from the previously published decrease. This followed a virtually unchanged August decrease. Transportation equipment, also down three of the last four months, led the decrease, $1.0 billion or 0.6 percent to $171.0 billion. Inventories of manufactured nondurable goods, down three of the last four months, decreased $0.9 billion or 0.3 percent to $329.9 billion. This followed a 0.3 percent August increase. Petroleum and coal products, also down three of the last four months, drove the decrease, $1.0 billion or 2.2 percent to $46.6 billion. By stage of fabrication, September materials and supplies increased 0.2 percent in durable goods and decreased 0.4 percent in nondurable goods. Work in process decreased 0.4 percent in durable goods and increased 1.4 percent in nondurable goods. Finished goods decreased 0.5 percent in durable goods and 0.9 percent in nondurable goods.

The BEA’s key source data and assumptions (xls) for 3rd quarter GDP indicates that they had estimated that the value of non-durable goods inventories would decrease by $0.4 billion on a Census basis in September before they estimated the 3rd quarter’s output, so the actual $0.3 billion increase reported here would result in a revision to GDP that would increase the third quarter’s growth rate by almost 0.02 percentage points…

September Wholesale Sales Up 0.3%, Wholesale Inventories Down 0.2%; Overestimated in GDP Report

The September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales during the month was $674.8 billion, up 0.3 percent (±0.4 percent)* from the revised August level, but 0.4 percent (±0.9 percent)* lower than the wholesale sales of September 2023… the August preliminary sales estimate was revised up to $672.6 billion from the $670.9 billion in wholesale sales reported last month, which thus revised the July to August change in sales from down 0.1% (±0.4 percent)* to up 0.2 percent (±0.4 percent)*…as an intermediate economic 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, since additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted $903.7 billion at month end, down 0.2 percent (±0.2 percent)* from the revised August level but 1.2 percent (±1.1 percent) lower than in September a year ago….August’s inventory value was revised from the $904.8 billion reported last month to $905.4 billion, which now a 0.2% increase from July…

In the advance report on 3rd quarter GDP of last week, wholesale inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories, which was released the day before the GDP release…that report estimated that our seasonally adjusted wholesale inventories were valued at $904,972 million at the end of September, down 0.1% from a revised $905,583 million at the end of August….that’s $1,466 million more than the wholesale inventories values of $903,703 million and $905,386 million for those two months than this report shows, which would imply that the quarterly change in 3rd quarter wholesale inventories was overestimated at roughly a $5.9 billion annual rate….in the 3rd quarter, a $5.9 billion nominal inventory change worked out to a $3.9 billion real change, so assuming there’s no significant imbalance in the inflation adjustments on the component inventories that were revised, the $3.9 billion revision implied would mean that the growth rate of 3rd quarter GDP was overestimated by around 0.06 percentage points, just based on what this report shows…

 

 

(the above is the synopsis that accompanied my regular sunday morning news links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most of which are picked from the aforementioned GGO posts, contact me…)