April’s jobs report; 1st Quarter GDP, March’s income and outlays, construction spending, factory inventories and JOLTS

Major economic reports released last week included the Employment Situation Summary for April and the Job Openings and Labor Turnover Survey (JOLTS) for March, both from the Bureau of Labor Statistics, the advance estimate of 1st quarter GDP and the concurrent March report on Personal Income and Spending, both from the Bureau of Economic Analysis, and the March report on Construction Spending (pdf) and the Full Report on Manufacturers’ Shipments, Inventories and Orders for March, both from the Census Bureau…The week also saw the release of the last regional Fed manufacturing survey for April: the Dallas Fed Texas Manufacturing Outlook Survey, covering Texas, western Louisiana and eastern New Mexico, reported their general business activity composite index fell to –-35.8 in April,​ down from -16.3 in March​ and its lowest reading since May 2020, indicating that a large majority of Texas manufacturers reported deteriorating business conditions during April…

Privately issued reports released during the week included the ADP Employment Report for April, wherein the payroll processor reported an increase of 62,000 private sector jobs in April, the light vehicle sales report for April from Wards Automotive, which estimated that vehicles sold at a 17.27 million annual rate in April, down from the four year high annual sales rate of 17.77 million in March, but up from the 15.74 million annual sales rate in April a year ago, and the February Case-Shiller Home Price Index from S&P Case-Shiller, which indicated that their index of the relative average of December, January and February home prices was 3.9% higher than their index of average prices for the same homes that sold during the same 3 month period of a year earlier….This week also saw the widely followed manufacturing purchasing manager’s survey from the Institute for Supply Management (ISM): the April 2023 Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 48.7% in April, down from 49.0% in March, which means that a slightly larger plurality of purchasing manufacturing managers saw worse conditions during the month…

1st Quarter GDP Shrunk at a 0.3% Rate on Jump in Imports

Our economy appears to have shrunk at a 0.3% rate in the 1st quarter, considerably weaker than during the fourth quarter, as growth in personal consumption of goods and services, fixed investment, inventories exports, and state and local government were more than offset by reduced growth of the federal government and by the negative impact of much higher imports… the Advance Estimate of 1st Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US contracted at a 0.3% annual rate from the output of the 4th quarter of 2024, when our real output grew at a 2.4% real rate….in current dollars, our first quarter GDP grew at a 3.46% annual rate, increasing from what would work out to be a $29,723.9 billion a year output rate in the 4th quarter of last year to a $29,977.6 billion annual rate in the 1st quarter of this year, with the headline 0.3% annualized rate of decrease in real output arrived at after weighted annualized inflation adjustments averaging 3.7%, known in aggregate as the GDP deflator, were computed from the price changes of each of the GDP components and applied to their current dollar change….

As is usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have averaged +/-0.6% in either direction before the third estimate for the quarter is released, which will be about two months from now….note that March construction, March trade in services, and non-durables inventory data have yet to be reported, and that the BEA assumed an annualized $10.8 billion decrease in exports of services, an annualized $4.7 billion increase in imports of services, a $3.4 billion increase in residential construction, a $0.6 billion increase in non-residential construction, a $0.9 billion decrease in public construction, and an $0.6 billion increase in nondurable manufacturing inventories for March before they estimated 1st quarter output (see the Key source data and assumptions excel file that accompanies this report for more specific details)..

While we cover the details on the 1st quarter below, remember that the news release for the Advance Estimate reports all quarter over quarter percentage changes at an annual rate, which means that they’re expressed as a change a bit over four times of that what actually occurred over the 3 month period, and that the prefix “real” is used to indicate that each change has been adjusted for inflation using price indexes chained from 2017 prices, and then that all percentage changes in this report are calculated from those ‘2017 dollar’ figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts, because the change in real GDP is not a monetary metric….

For our purposes, all the data that we’ll use in reporting the changes here comes directly from the pdf for the advance estimate of 1st quarter GDP, which we find the link to on the BEA’s GDP landing page, where you can also find links to just the tables on Excel and other technical notes….specifically, we​'​ll report data from table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2021, table 2, which shows the contribution of each of the components to the GDP growth figures for those quarters and years, table 3, which shows both the current dollar value and the inflation adjusted value in 2012 dollars of each of those components, and table 4, which shows the change in the price indexes for each of the GDP components….

Our personal consumption expenditures (PCE), which are used to compute roughly 70% of GDP, grew at an 5.46% annual rate in current dollars in the 1st quarter, which worked out to represent a rounded real growth rate of 1.8% of consumed goods and services after an annualized PCE price index increase averaging 3.8% was used to adjust that personal spending for changes in prices….consumer spending on durable goods shrunk at a 2.6% rate in current dollars​m while prices of those durable goods were on average 0.9% higher, and from that the BEA figured that the output of consumer durables shrunk at a 3.4% rate, as a decrease in real consumption of motor vehicles and parts at a 11.1% rate accounted for about 95% of the decrease in durables and more than offset growth in output of furnishings, durable household equipment, and recreational goods and vehicles….at the same time, the BEA found that the real output of consumer non-durable goods grew at a 2.7% rate in the first quarter, after an annualized 5.8% increase in consumer spending for non-durable goods was adjusted for an average increase in non-durable prices at a 3.0% rate, as increases in real consumption of food and beverages, clothing and footwear, gasoline and other energy goods and “other” nondurable goods all contributed to non-durables growth …meanwhile, the 6.7% nominal dollar growth in consumer outlays for services was deflated by a 4.2% increase in prices for services to show that real output of consumer services grew at 2.4% annual rate, as real growth of health care at a 5.2% rate accounted for more than a third of the quarter’s growth in services….as a result of those changes in growth from the 4th to the 1st quarter, the decrease in the output of durable goods subtracted 0.26 percentage points from 1st quarter GDP, while the increased real consumption of non-durable goods added 0.37 percentage points to the growth of GDP​, ​and increased consumption of services added 1.10 percentage points to the growth rate of the 1st quarter economy..

The change in the other components of the change in GDP is computed by the BEA in the same manner that we have just illustrated for computing real PCE; ie, the annualized increase in current dollar spending for the quarter is adjusted with the annualized inflation factor for that component, yielding the change in real units of goods or services produced during the quarter, at an annual rate……thus, after inflation adjustments, real gross private domestic investment, which had shrunk at a 5.6% annual rate in the 4th quarter of 202​4, grew at a 21.9% annual rate from there in the 1st quarter, as real fixed investment grew at an 7.8% annual rate in the 1st quarter, after shrinking at a 1.1% rate in the 4th quarter, and inventories also grew sharply.…among fixed investments, real non-residential fixed investment grew at a 9.8% rate, as real investment in non-residential structures grew at a 0.4% rate and added 0.01 percentage points to 1st quarter GDP growth, real investment in equipment grew at 22.5% rate and added 1.06 percentage points to 1st quarter GDP, and real investment in intellectual property grew at 4.1% rate and added 0.22 percentage points to GDP….at the same time, real residential investment grew at a 1.3% rate and added 0.05 percentage points to GDP….for an easy to understand table as to what’s included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3…

Meanwhile, a big increase in the growth of real inventories increased overall gross investment and hence GDP, as real private inventories grew by an inflation adjusted $140.1 billion in the quarter, after growing at an inflation adjusted $8.9 billion in the 4th quarter…as a result, the $131.3 billion positive change in real inventory growth added 2.25 percentage points to the 1st quarter’s growth rate, after a $49.0 billion decrease in real inventory growth in the 4th quarter had subtracted 0.84 percentage points from that quarter’s GDP….however, since growth in inventories indicates that more of the goods produced during the quarter would have been left in storage or “sitting on the shelf”, the $131.3 billion increase in their growth conversely means real final sales of GDP were lower by that amount, and hence real final sales of GDP fell at a 2.5% rate in the 1st quarter, down from the real final sales growth rate of 3.3% in the 4th quarter, when the decrease in inventory growth meant that the quarter’s growth in real final sales was greater than that of the quarter’s GDP…

Both real exports and real imports increased during the first quarter, but our imports increased by a quite bit more, and hence the net of our international trade was a big subtraction from GDP…Our real exports of goods and services rose at a 1.8% rate in the first quarter, after falling at a 0.2% rate in the 4th quarter, while our real imports rose at a 41.3% rate in the 1st quarter, after falling at a 1.9% rate in the 4th quarter. As you’ll recall, increases in exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted in the GDP computation elsewhere), while increases in imports subtract from GDP because they represent either consumption or investment that was included in another GDP component that shouldn’t have been, because it was not produced here. Thus the first quarter increase in real exports added 0.19 percentage points to 1st quarter GDP, after the 4th quarter decrease in exports had subtracted a rounded 0.01 percentage point from fourth quarter GDP. On the other hand, since imports subtract from GDP, their increase at a 41.3% rate subtracted 5.03 percentage points from first quarter GDP, after the 4th quarter import decrease had added 0.27 percentage points to that quarter’s growth.. Hence, our deteriorating trade imbalance subtracted a net of 4.83 percentage points from 1st quarter GDP, after our improving trade deficit had added 0.26 percentage points to GDP in the fourth quarter…

Finally, the total of real consumption and investment by all branches of government decreased at a 1.4% annual rate in the 1st quarter, after increasing at a 3.1% rate in the 4th quarter, as federal government consumption and investment shrunk at a 5.1% rate, while state and local consumption and investment grew at a 0.8% rate. Inflation adjusted federal spending for defense shrunk at a 8.0% rate and subtracted 0.31 percentage points from the 1st quarter’s GDP growth, while real non-defense federal consumption and investment shrunk at a 1.0% rate and subtracted 0.08 percentage points from GDP growth….note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of goods or services….Meanwhile, state and local government investment and consumption expenditures grew at a 0.8% annual rate and added 0.22 percentage points to the growth of 1st quarter GDP, after a real decrease in state and local investment at a 3.3% annual rate had subtracted 0.03 percentage points from the state and local contribution to GDP…

Employers Added 177,000 Jobs in April; Unemployment Rate Remained at 4.2%

The Employment Situation Summary for April indicated that payroll job growth was moderately above expectations, that the labor force participation rate and the employment rate both rose 0.1%, and that the unemployment rate was unchanged from March…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 177,000 jobs in April, after the previously estimated payroll job increase for March was revised down from 228,000 to 185,000, while the payroll jobs increase for February was revised down from 117,000 to 102,000…including those revisions, this report thus represents a net of 119,000 more seasonally adjusted payroll jobs than were reported last month, which ends up below expectations there’d be an increase of 130,000 jobs ​w​ith this month’s report….the unadjusted data shows that there were actually 905,000 more payroll jobs extant in April than in March, as the usual seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were washed out of this report by the seasonal adjustments…

Seasonally adjusted job increases in March were spread through both the goods producing and the service sectors, with auto manufacturing and ​the federal government sectors showing fairly modest job losses…since the BLS summary of the job gains by sector is clear and ​a​s detailed ​a​s our usual synopsis, we’ll just quote that summary here:

• Total nonfarm payroll employment increased by 177,000 in April, roughly in line with the average monthly gain of 152,000 over the prior 12 months. In April, employment continued to trend up in health care, transportation and warehousing, financial activities, and social assistance. Federal government employment declined. (See table B-1.)
• Health care added 51,000 jobs in April, about the same as the average monthly gain of 52,000 over the prior 12 months. In April, job growth continued in hospitals (+22,000) and ambulatory health care services (+21,000).
• Employment in transportation and warehousing increased by 29,000 in April, following little change in the prior month (+3,000). Job gains occurred in warehousing and storage (+10,000), couriers and messengers (+8,000), and air transportation (+3,000) in April. Transportation and warehousing had added an average of 12,000 jobs per month over the prior 12 months.
• In April, financial activities employment continued to trend up (+14,000). The industry has added 103,000 jobs since its employment trough in April 2024.
• Employment in social assistance continued its upward trend in April (+8,000) but at a slower pace than the average monthly gain over the prior 12 months (+20,000).
• Within government, federal government employment declined by 9,000 in April and is down by 26,000 since January. (Employees on paid leave or receiving ongoing severance pay are counted as employed in the establishment survey.)
• Employment showed little or no change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; retail trade; information; professional and business services; leisure and hospitality; and other services.

The establishment survey also showed that average hourly pay for all employees rose by 6 cents an hour to $36.06 an hour in April, after it had increased by an unrevised 9 cents an hour in March; at the same time, the average hourly earnings of production and non-supervisory employees increased by 10 cents an hour to $31.06 an hour…report​s from employers also ​showed that the average workweek for all private payroll employees was was unchanged at 34.3 hours in April, after a tenth of an hour increase in March, while hours for production and non-supervisory personnel was unchanged at 33.8 hours, after also increasing a tenth of an hour in March….however, the manufacturing workweek fell by 0.2 hours to 40.0 hours, while average factory overtime remained unchanged at 2.9 hours…

At the same time, the April household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 436,000 to 163,944,000, while the similarly estimated number of those counted as unemployed rose by 82,000 to 7,165,000; which together meant there was a rounded 518,000 increase in the total labor force….since the working age population had grown by 174,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by a rounded 343,000 to 102,088,000… meanwhile, the increase of those in the labor force was large enough, when compared to the civilian noninstitutional population, to raise the labor force participation rate from 62.5% in March to 62.6% in April….similarly, the increase in number employed as a percentage of the increase in the population was large enough to raise the employment to population ratio, which we could think of as an employment rate, from 59.9% in March to 60.0% in April….on the other hand, the increase in the number unemployed was not large enough to raise the unemployment rate, as it remained at 4.2% in April….meanwhile, the number who reported they were involuntarily working part time fell by 90,000 to 4,690,000 in April, which was enough to lower the alternative measure of unemployment, U-6, which includes both discouraged workers and those “employed part time for economic reasons”, from 7.9% in March to a 3 month low of 7.8% in April…

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 alongside the press release to avoid the need to scroll up and down the page..

March Personal Income Rose 0.5%, Personal Spending Rose 0.7%, PCE Price Index was Unchanged, Savings Rate at 3.9%

Wednesday’s release of the March Income and Outlays report from the Bureau of Economic Analysis was concurrent with the GDP release on the same day, and all the PCE data in the first quarter GDP report we just covered actually originated with this report…and like that GDP report, all the dollar values reported here are seasonally adjusted and at an annual rate, ie, they tell us what personal income, spending and saving would be for a year if March’s adjusted income and spending were extrapolated over an entire year…however, the percentage changes are computed monthly, from one 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 February to March….

Hence, when the opening phrase of the press release for this report tell us “Personal income increased $116.8 billion (0.5 percent at a monthly rate) in March…“, it means that the annualized figure for all types of personal income in March, $25,537.8 billion, was $116.8 billion, or almost 0.5% more than the seasonally adjusted annualized personal income figure of $25,420.9 billion for February; the actual increase in personal income from February to March is not given….similarly, disposable personal income, which is income after taxes, rose by about 0.5%, from an annual rate of $22,259.7 billion in February to an annual rate of $22,361.7 billion in March…the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized….the main contributors to the $116.8 billion annualized increase in personal income in March were a $66.5 billion annual rate of increase in income from wages and salaries, a $24.5 billion annualized increase in farm proprietors' income, and a $14.4 billion annualized increase in interest and dividend income…

At the same time, seasonally adjusted personal consumption expenditures (PCE) for March, which were included in the change in PCE in the 1st quarter GDP report, rose at a $134.5 billion annual rate to a $20,653.3 billion pace of consumer spending annually, almost 0.7% above that of February’s rate, after February’s PCE rate was revised from the previously reported annual rate of $20,439.3 billion to $20,518.9 billion, a revision which was also included in the GDP report…the current dollar increase in March’s spending included a $79.9 billion annualized increase to an annualized $14,204.5 billion in spending for services, and a $54.5 billion increase to $6,448.8 billion in annualized spending for goods….total personal outlays for March, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $136.6 billion to $21,489.4 billion, which left personal savings, which is disposable personal income less total outlays, at a $872.3 billion annual rate in March, down from the revised $906.9 billion in annualized personal savings in February…as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 3.9%, down from a revised 4.1% saving rate in February…

While our personal consumption expenditures accounted for 69.5% of our first quarter GDP, before they were included in the measurement of the change in our output they were first 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 an average price index for all personal consumption expenditures, which is a chained price index based on 2017 prices = 100, which is then applied to the current dollar spending….from Table 5 in the pdf for this report, we find that that index fell to 125.732 in March from 125.788 in February, giving us month a over month inflation rate of 0.044519% in March, which the BEA reports as an unchanged PCE price index in their tables….at the same time, Table 7 gives us a year over year PCE price index increase of 2.3% in March, down from 2.7% in February, and a core PCE price index increase, excluding food and energy, of 2.7% for the past year, both still above the Fed’s 2% inflation target….applying the March inflation adjustment to the change in March PCE shows that real PCE was up 0.699837% in March, which BEA reports as ​a 0.7%​ increase in their press release and in the tables, following a February real PCE increase reported at 0.1%…note that when those PCE price indexes are applied to a given month’s annualized current dollar PCE, it yields that month’s annualized real PCE in chained 2017 dollars, which aren’t really dollar amounts at all, but merely the means that the BEA uses to compare one month’s or one quarter’s real goods and services produced to another….those results are shown in table 4 of the PDF, where the monthly figures given are identical to the quarterly figures shown in table 3 in the GDP report, and which were thus used to compute the contribution of real personal consumption of goods and services to GDP…

Job Openings and Layoffs Fell in March; Hiring and Job Quitting Rose

The Job Openings and Labor Turnover Survey (JOLTS) report for March from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 288,000 to 7,192,000 in March, after February’s job openings were revised down to 7,480,000 from the originally reported 7,568,000…March’s jobs openings were also down 11.1% from the 8,093,000 job openings reported in March a year earlier, as the job openings ratio expressed as a percentage of the employed fell to 4.3% in March, down from a revised 4.5% rate in February, and down from the 4.9% rate of March a year ago…since the employment report indicated there were 7,083,000 unemployed during March, that means there were still 1.02 job openings for each person who reported they were unable to find work during the month….the federal government, with a 36,000 job opening decrease to 98,000 openings, saw the largest percentage decrease, while job openings in finance and insurance increased by 25,000 to 296,000..(details on job openings by industry and region can be viewed in Table 1)…like most BLS releases, the press release for this reportis easy to understand and also refers us to the associated table for the data cited, which are linked 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 March, seasonally adjusted new hires totaled 5,411,000, up by 41,000 from the revised 5,370,000 who were hired or rehired in February, as the hiring rate as a percentage of all employed was unchanged at 3.4% in March, while it was down from the 3.5% the hiring rate in March a year ago (details of hiring by sector since November are in table 2)….meanwhile, total separations fell by 179,000 to 5,137,000 in March, as the separations rate as a percentage of the employed fell to 3.2% in March from a revised 3.3% rate in February, which was ​also down from the separations rate of 3.3% a year ago (see table 3)…subtracting the 5,137,000 total separations from the total hires of 5,411,000 would imply an increase of 274,000 jobs in March, quite a bit more than the revised payroll job increase of 185,000 jobs for March reported by the April establishment survey, but still within the expected +/-130,000 margin of error for these incomplete job samplings….

Breaking down the seasonally adjusted job separations, the BLS found that 3,332,000 of us voluntarily quit our jobs in March, up by 82,000 from the revised 3,250,000 who quit their jobs in February, while the quits rate, widely watched as an indicator of worker confidence, rose to 2.1% in March from 2.0% in February, and matched the quits rate of 2.1% a year earlier (see details of job quitting by industry in table 4)….in addition to those who quit, another 1,558,000 were either laid off, fired or otherwise discharged in March, down by 222,000 from the revised 1,780,000 who were discharged in February, while the discharges rate fell 0.1% to 1.0% of all those who were employed during the month, which matched the discharges rate of 1.0% a year ago (see details of layoffs by industry in table 5)…meanwhile, other separations, which includes retirements and deaths, were at 247,000 in March, down from 286,000 in February, for an ‘other separations rate’ of 0.2%, same as in February and as in March of last year….both seasonally adjusted and the 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…

Construction Spending Fell 0.5% in March after Prior Months Were Revised Higher

The Census Bureau’s report on construction spending for March (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $2,196.1 billion annually if extrapolated over an entire year, which was 0.5 percent (±0.8 percent)* below the revised annualized February estimate of $2,206.9 billion, but 2.8 percent (±1.2 percent) above the estimated annualized level of construction spending in March of last year…Census also reports that for the first three months of this year, ​unadjusted construction spending totaled $485.7 billion, 2.9 percent (±1.0 percent) above the $472.2 billion spent during the same three months of 2024… the annualized February construction spending estimate was revised 0.5% higher, from $2,195.8 billion to $2,206.9 billion, while the annual rate of construction spending for January was revised almost 0.7% higher, from $2,179.9 billion to $2,194.3 billion, which thus revised the February construction spending increase from up 0.7% to up 0.6%..

A further breakdown of the different subsets of construction spending is provided by a Census Bureau summary, which precedes the more detailed spreadsheets, and which we include below:

• Private Construction Spending on private construction was at a seasonally adjusted annual rate of $1,688.0 billion, 0.6 percent (±0.5 percent) below the revised February estimate of $1,697.7 billion. Residential construction was at a seasonally adjusted annual rate of $937.7 billion in March, 0.4 percent (±1.3 percent)* below the revised February estimate of $941.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $750.3 billion in March, 0.8 percent (±0.5 percent) below the revised February estimate of $756.0 billion.
• Public Construction In March, the estimated seasonally adjusted annual rate of public construction spending was $508.1 billion, 0.2 percent (±1.5 percent)* below the revised February estimate of $509.2 billion. Educational construction was at a seasonally adjusted annual rate of $110.0 billion, 0.6 percent (±1.6 percent)* below the revised February estimate of $110.6 billion. Highway construction was at a seasonally adjusted annual rate of $145.8 billion, 0.5 percent (±5.6 percent)* below the revised February estimate of $146.4 billion.

With the upward revisions to January and February figures, construction spending for those two months was higher than what was reported by the BEA in their advance estimate of GDP released earlier in week, while construction spending for March was lower than what was reported in the GDP report.…as we saw above, annualized construction spending for February was revised $11.1 billion higher, and annualized construction spending for January was revised $14.4 billion higher….in reporting 1st quarter GDP, the BEA’s key source data and assumptions (xls) indicated that they had estimated March residential construction would be $3.4 billion more (at an annual rate) than that of the previously reported February figure, that annualized March nonresidential construction would be valued $0.6 billion more than that of the reported February figure, and that March public construction would decrease at a $0.9 billion rate from previously reported February levels…totaling those figures, the 1st quarter GDP report used figures showing March construction spending was at an $3.1 billion annual rate higher than previously reported February levels…since this report shows that March construction spending actually fell at an $10.8 billion annual rate from February figures that were revised $11.1 billion higher, that means the total annualized construction figure used for March in the GDP report was $3.1 billion too high….averaging that overstatement with the the understatements in the annual rates of construction spending used for January and February in the GDP report, we thus find that this report shows that construction spending was underestimated at an $7.5 billion annual rate in the 1st quarter GDP report, implying an upward revision to the related GDP components at a rate that would result in addition of about 0.14 percentage points from first quarter GDP when the 2nd estimate is released on May 30th…we should caution that since our estimate is based on the aggregate change in spending, an imbalance of inflation adjustments among the revised construction components might also have a material impact on the final revision…

Value of Factory Shipments Fell 0.1% in March, Value of Factory Inventories Rose 0.1%

The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for March from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by increased $25.7 billion or 4.3 percent to $618.8 billion in March, following an increase of $2.8 billion or 0.5% to $593.2 billion in February, which was revised from the increase of $3.6 billion or 0.6 percent to $594.0 billion that was reported for February 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 reliable as revised updates to the March advance report on durable goods which was released last week…on those durable goods orders 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 March, up three consecutive months, increased $25.7 billion or 4.3 percent to $618.8 billion, the U.S. Census Bureau reported today. This followed a 0.5 percent February increase. Shipments, down following four consecutive monthly increases, decreased $0.6 billion or 0.1 percent to $596.2 billion. This followed a 0.7 percent February increase. Unfilled orders, up eight of the last nine months, increased $27.6 billion or 2.0 percent to $1,429.4 billion. This followed a 0.1 percent February increase. The unfilled orders-to-shipments ratio was 6.98, up from 6.81 in February. Inventories, up five consecutive months, increased $0.7 billion or 0.1 percent to $865.3 billion. This followed a 0.1 percent February increase. The inventories-to-shipments ratio was 1.45, unchanged from February.
• New Orders for manufactured durable goods in March, up three consecutive months, increased $26.6 billion or 9.2 percent to $315.7 billion, unchanged from the previously published increase. This followed a 0.8 percent February increase. Transportation equipment, also up three consecutive months, led the increase, $26.6 billion or 27.1 percent to $124.6 billion. New orders for manufactured nondurable goods decreased $0.9 billion or 0.3 percent to $303.2 billion.
• Shipments of manufactured durable goods in March, up four consecutive months, increased $0.3 billion or 0.1 percent to $293.0 billion, unchanged from the previously published increase. This followed a 1.3 percent February increase. Primary metals, up six of the last seven months, led the increase, $0.3 billion or 1.2 percent to $28.0 billion. Shipments of manufactured nondurable goods, down following five consecutive monthly increases, decreased $0.9 billion or 0.3 percent to $303.2 billion. This followed a 0.1 percent February increase. Petroleum and coal products, down two consecutive months, drove the decrease, $1.5 billion or 2.4 percent to $62.4 billion.
• Unfilled Orders for manufactured durable goods in March, up eight of the last nine months, increased $27.6 billion or 2.0 percent to $1,429.4 billion, unchanged from the previously published increase. This followed a 0.1 percent February increase. Transportation equipment, also up eight of the last nine months, drove the increase, $28.1 billion or 3.1 percent to $931.6 billion.
• Inventories of manufactured durable goods in March, up five consecutive months, increased $0.5 billion or 0.1 percent to $533.3 billion, unchanged from the previously published increase. This followed a virtually unchanged February increase. Machinery, up four of the last five months, led the increase, $0.2 billion or 0.2 percent to $94.5 billion. Inventories of manufactured nondurable goods, up five consecutive months, increased $0.2 billion or 0.1 percent to $332.0 billion. This followed a 0.3 percent February increase. Chemical products, up five of the last six months, drove the increase, $0.3 billion or 0.3 percent to $114.0 billion. By stage of fabrication, March materials and supplies decreased 0.1 percent in durable goods and increased 0.1 percent in nondurable goods. Work in process increased 0.5 percent in durable goods and 0.6 percent in nondurable goods. Finished goods decreased 0.2 percent in both durable goods and nondurable goods.

The BEA’s Key source data and assumptions (xls) for the advance estimate of first quarter GDP indicates on line 152 that they had estimated that the value of manufactured nondurable goods inventories would increase by $0.6 billion on a Census basis (ie, before price adjustments) in March, while this report obviously reports total non-durable goods factory inventories increased by $0.2 billion…hence, that means that the GDP report overstated non-durable inventories by $0.4 billion, or at a $1.6 billion annual rate, which would result in a revision that would subtract about 0.03 percentage points from GDP when the second estimate is released May 26th…At the same time, inventories of durable goods were “unchanged from the previously published increase.” which means that no revision to 1st quarter GDP will be needed based on factory inventories of durable goods…

 

 

(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…)