May’s jobs report, April’s trade deficit, construction spending, factory inventories and JOLTS

The major economic releases of last week included both of the major monthly employment reports: the Employment Situation Summary for May and the Job Openings and Labor Turnover Survey (JOLTS) for April, both from the Bureau of Labor Statistics, in addition to the Commerce Dept’s report on our International Trade in Goods and Services for April, the April report on Construction Spending (pdf), and the Full Report on Manufacturers’ Shipments, Inventories and Orders for April, with both of those from the Census Bureau.…

Privately issued reports released this week included the ADP Employment Report for May, wherein the national payroll processor reported a 37,000 job increase in May, the light vehicle sales report for May from Wards Automotive, which estimated that vehicles sold at a 15.65 million annual rate in May, down from the 17.27 million annual rate of sales in April, and down from the 15.90 million annual sales rate of May a year ago, and the Mortgage Monitor for June (covering April data) from ICE Black Knight Financial Services, which indicated that 3.22% of mortgages were delinquent in April, up from the 3.21% that were delinquent in March, and up from the 3.09% delinquency rate of April 2024, and that 0.38% of mortgages remained in the foreclosure process in April, down from 0.39% in March but up from the 0.36% of mortgages that were in foreclosure a year ago…the full Mortgage Monitor for April is a graphics dense 20 page pdf, should you want to know more about the condition of US mortgages…

This week also saw both of the widely followed purchasing manager’s surveys for May from the Institute for Supply Management (ISM): the May Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 48.5% in May, down from 48.7% in April, which suggests a slightly larger plurality of manufacturing industry purchasing managers nationally reported deterioration in various facets of their business in May, while the May Services Report On Business saw the ISM Services index fall from a reading of 51.6% in April to a slightly contractionary reading 49.9% in May, below the 50-percent breakeven point for only the fourth time in the past 60 months, with 49.9% indicating that service industry purchasing managers were just about evenly split between those reporting improvement and those reporting deterioration in various facets of their business in May..

Employers Added 139,000 Jobs in May; Employment Rate Fell 0.3%, Unemployment Rate Unchanged

The Employment Situation Summary for May indicated that payroll job growth was below normal, albeit slightly above expectations, that the labor force participation rate fell 0.2%, that the employment rate fell 0.3%, and that the unemployment rate was unchanged from April…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 139,000 jobs in May, after the previously estimated payroll job increase for March was revised down from 185,000 to 120,000, and the payroll jobs increase for April was revised down from 177,000 to 147,000 jobs…with those revisions, that means that this report indicates an increase of just 44,000 more jobs than were reported last month, far less than the 149,000 job addition average seen over the past twelve months, and far less than the 130,000 job increase that was expected….the unadjusted data shows that there were actually 726,000 more payroll jobs extant in May than in April, as excessive seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were washed out of the total by the seasonal adjustment algorithm…

Seasonally adjusted job increases in May were concentrated in the private services sector, while jobs in goods producing and in government were down slightly…. since the BLS summary of the job gains by sector is clear and usually as detailed as our usual synopsis, we’ll just quote from that summary here:

• Total nonfarm payroll employment increased by 139,000 in May, similar to the average monthly gain of 149,000 over the prior 12 months. In May, employment continued to trend up in health care, leisure and hospitality, and social assistance. Federal government continued to lose jobs. (See table B-1.)
• Health care added 62,000 jobs in May, higher than the average monthly gain of 44,000 over the prior 12 months. In May, job gains occurred in hospitals (+30,000), ambulatory health care services (+29,000), and skilled nursing care facilities (+6,000).
• Employment in leisure and hospitality continued to trend up in May (+48,000), largely in food services and drinking places (+30,000). Over the prior 12 months, leisure and hospitality had added an average of 20,000 jobs per month.
• In May, social assistance employment continued to trend up (+16,000), reflecting continued growth in individual and family services (+16,000).
• Federal government employment continued to decline in May (-22,000) and is down by 59,000 since January. (Employees on paid leave or receiving ongoing severance pay are counted as employed in the establishment survey.)
• Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; retail trade; transportation and warehousing; information; financial activities; professional and business services; and other services.

The establishment survey also showed that average hourly pay for all employees rose by 15 cents an hour to $36.24 an hour in May, after it had increased by a revised 9 cents an hour in April; at the same time, the average hourly earnings of production and non-supervisory employees increased by 12 cents to $31.18 an hour….employers also reported that the average workweek for all private payroll employees was unchanged for a third month at 34.3 hours in May, while hours for production and non-supervisory personnel remained at an average of 33.7 hours…at the same time, the manufacturing workweek was up by a tenth of an hour to 40.1 hour, while average factory overtime was unchanged at 2.9 hours…

Meanwhile, the seasonally adjusted extrapolation from the May household survey estimated indicated that the number of those who were employed fell by an estimated 696,000 to 163,273,000, while the similarly estimated number of those who were unemployed rose by 71,000 to 7,237,000; which thus meant there was a rounded decrease of 625,000 in the total labor force…since the working age population had grown by 188,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 813,000 to 102,875,000, the highest since April 2020…. meanwhile, the decrease of those in the labor force as a percentage of the increasing working age population was enough to lower the labor force participation rate by 0.2%, from 62.6% in April to 62.4% in May, matching the lowest since January 2023….likewise, the decrease in the number employed vis a vis the increasing population was enough to lower the employment to population ratio, which we could think of as an employment rate, from 60.0% to 59.7%, the lowest since January 2022…meanwhile, the increase in those counted as unemployed vis a vis the total labor force was not enough to raise the unemployment rate, as it remained at 4.2% in May…at the same time, the number who reported they were involuntarily working part time fell by 74,000 to 4,548,000 in May, which meant the the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, remained unchanged at 7.8% of the labor force in May…

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..

Job Openings, Hiring, and Layoffs were Up in April, Job Quitting was Down

The Job Openings and Labor Turnover Survey (JOLTS) report for April from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 191,000, from 7,200,000 in March to 7,391,000 job openings in April, after March’s job openings were revised 8,000 higher, from the originally reported 7,192,000 to 7,200,000…April’s jobs openings were still down by 3.0% from the 7,619,000 job openings reported for April a year ago, as the job opening ratio expressed as a percentage of the employed rose from 4.3% in March to 4.4% in April, but it was down from 4.6% a year ago, and down from 7.2% three years ago, when there were two job opening for each person reported unemployed….the greatest increase in April job openings was in the professional and business services sector, where openings rose by 171,000 to 1,420,000, while job openings in accommodation and food services fell by 135,000 to 690,000… (details on job openings by industry and region can be viewed in Table 1)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table 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 April, seasonally adjusted new hires totaled 5,573,000, up by 169,000 from the revised 5,404,000 who were hired or rehired in March, as the hiring rate as a percentage of all those employed rose from 3.4% in March to 3.5% in April, which matched the 3.5% hiring rate of April a year earlier (details of hiring by industry since January are in table 2)….meanwhile, total separations were also higher, rising by 105,000, from 5,183,000 in March to 5,288,000 in April, as the separations rate as a percentage of the employed remained at 3.3% in April, which was down from the 3.4% separations rate in April a year ago (see table 3)…subtracting the 5,288,000 total separations from the total hires of 5,573,000 would imply an increase of 285,000 jobs in April, quite a bit more than the revised payroll job increase of 172,000 for April reported by the May establishment survey we reviewed above, but still with the expected +/-110,000 margin of error in these incomplete extrapolations…

Breaking down the seasonally adjusted job separations, the BLS found that 3,194,000 of us voluntarily quit our jobs in April, down by 150,000 from the revised 3,344,000 who quit their jobs in March, while the quits rate, widely watched as an indicator of worker confidence, fell to 2.0% in April from 2.1% in March, which was also down from the quits rate of 2.2% a year earlier (see quits details in table 4)….in addition to those who quit, 1,786,000 of us were either laid off, fired or otherwise discharged in April, up by 196,000 from the revised 1,590,000 who were discharged in March, as the discharges rate rose from 1.0% to 1.1% of all those who were employed during the month, which was also higher than the 1.0% discharges rate of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 308,000 in April, up from 248,000 in March, for an ‘other separations’ rate of 0.2%, the same rate as in March and as in April a year ago….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 easily accessed using the links to tables at the bottom of the press release…

US Trade Deficit Fell 55.5% in April on Reversal of 1st Quarter Record Deficit

Our trade deficit was 55.5% lower April, as our exports increased while our imports decreased by a record amount….the Commerce Dept report on our international trade in goods and services for April, incorporating an annual revision of trade figures back to 2018, indicated that our seasonally adjusted goods and services trade deficit fell by $76.7 billion to $61.6 billion in April, from a March deficit that was revised from the originally reported $140.5 billion to $138.3 billion, a revision which should result in an upward revision of about 0.04 percentage points to 1st quarter GDP when the third estimate is released at the end of the month…however, since this month’s report also reflects revised statistics on trade in goods on both a Census basis and a balance of payments (BOP) basis beginning with 2020, and revised statistics on trade in services going back to 2018, the 4th quarter basis for the 1st quarter’s growth in trade would also need to be revised to determine the ultimate impact on 1st quarter GDP, and the BEA will not include that revision until the annual revision to GDP is released at the end of September…

In rounded figures, the value of our April exports rose by $8.3 billion, or by 3.0%, to $289.4 billion, on a $6.2 billion increase to $190.5 billion in our exports of goods and a $2.1 billion increase to $98.9 billion in our exports of services, while the value of our imports fell by $68.4 billion, or by 16.3% to $351.0 billion, as a $68.9 billion decrease to $277.9 billion in our imports of goods was partly offset by a $0.5 billion increase to $73.1 billion in our imports of services…export prices averaged 0.1% higher in April, which means a small part of the nominal increase in exports for the month was price related, and that real exports likely only rose about 2.9%, while import prices were also 0.1% higher, meaning the decrease in the value of our imports was despite slightly higher prices, and that real imports likely fell around 16.4%….

The April increase in our exports of goods came about largely as a result of higher exports of industrial supplies and materials and of capital goods, which were partly offset by lower exports of automotive goods.…referencing the Full Release and Tables for April (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $10,371 million to $75,248 million on a $8,143 million increase in our exports of finished metal shapes, a $4,215 million increase in our exports of non-monetary gold, and a $652 million increase in our exports of other precious metals, which were partly offset by a $1,087 million decrease in our exports of crude oil and a $457 million decrease in our exports of petroleum products other than fuel oil, and that our exports of capital goods rose by by $965 million to $59,343 million as a $555 million increase in our exports of computers, a $467 million increase in our exports of telecommunications equipment, and a $310 million increase in our exports of semiconductors were partly offset by a $321 million decrease in our exports of electric apparatuses and a $320 million decrease in our exports of computer accessories…in addition, our exports of goods not categorized by end use rose by $379 million to $8,378 million….partly offsetting the increases in those export categories, our exports of automotive vehicles, parts, and engines fell by $3,317 million to $12,084 million on a $1,706 million decrease in our exports of passenger cars, a $456 million decrease in our exports of automotive parts and accessories other than engines, chassis, or tires, and a $1,007 million decrease in our exports of trucks, buses, and special purpose vehicles, while our exports of consumer goods fell by $1,548 million to $20,455 million on a $910 million decrease in our exports of pharmaceutical preparations and a $442 million increase in our exports of gem diamonds, and our exports of foods, feeds and beverages fell by $626 million to $13,465 million..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and indicates that April saw reduced imports of all categories of goods, led by lower imports of consumer goods, industrial supplies and materials, and automotive products….our imports of consumer goods fell by $32,958 million to $69,897 million on a $25,978 million decrease in our imports of pharmaceutical preparations, a $3,497 million decrease in our imports of cell phones, a $630 million decrease in our imports of artwork and other collectibles, an $484 million decrease in our imports of gem diamonds and a $316 million decrease in our imports of textile apparel and household goods not otherwise itemized, and our imports of industrial supplies and materials fell by $23,304 million to $51,961 million on a $16,906 million decrease in our imports of finished metal shapes, a $1092 million decrease in our imports of precious metals other than gold, a $902 million decrease in our imports of crude oil, an $814 million decrease in our imports of petroleum products other than fuel oil, a $655 million decrease in our imports of nuclear fuel materials, a $534 million decrease in our imports of bauxite and aluminum, and a $483 million decrease in our imports of organic chemicals…at the same time, our imports of automotive vehicles, parts and engines fell by $8,295 million to $33,240 million on an $6,442 million decrease in our imports of passenger cars, a $1,105 million decrease in our imports of trucks, buses, and special purpose vehicles, and a $595 million decrease in our imports of automotive parts and accessories other than tires, engines, and chassis, while our imports of capital goods fell by $2,845 million to $90,630 million on a $791 million decrease in our imports of semiconductors, a $474 million decrease in our imports of civilian aircraft engines, and a $322 million decrease in our imports of civilian aircraft…in addition, our imports of foods, feeds, and beverages fell by $846 million to $18,485 million on lower imports of fruits and juices, meat products, and cocoa beans, and our imports of other goods not categorized by end use fell by $405 million to $11,727 million….

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

The April figures show surpluses, in billions of dollars, with Hong Kong ($6.9), Netherlands ($4.8), United Kingdom ($4.3), Switzerland ($3.5), South and Central America ($3.3), Australia ($1.4), Singapore ($1.4), Brazil ($1.0), Saudi Arabia ($0.9), and Belgium ($0.9). Deficits were recorded, in billions of dollars, with China ($19.7), European Union ($17.9), Vietnam ($14.5), Mexico ($13.5), Taiwan ($9.7), Ireland ($9.5), Japan ($5.8), Germany ($5.4), India ($5.3), South Korea ($3.3), Italy ($3.2), Canada ($2.6), Malaysia ($2.3), France ($1.9), and Israel ($0.9).

• The deficit with Ireland decreased $19.9 billion to $9.5 billion in April. Exports increased less than $0.1 billion to $1.4 billion and imports decreased $19.9 billion to $10.9 billion.
• The balance with Switzerland shifted from a deficit of $15.4 billion in March to a surplus of $3.5 billion in April. Exports increased $5.6 billion to $9.1 billion and imports decreased $13.4 billion to $5.6 billion.
• The deficit with Taiwan increased $0.7 billion to $9.7 billion in April. Exports increased $0.7 billion to $5.0 billion and imports increased $1.4 billion to $14.6 billion.

To gauge the impact of April’s trade on 2nd quarter growth, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2017 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that the figures are not annualized in the table in this report…from that table, we can figure that the 1st quarter’s real exports of goods averaged 146,966.7 million monthly in 2017 dollars, while April’s inflation adjusted exports were at 155,616 million in that same 2017 dollar quantity index representation… figuring the annualized change between those two figures, we find that April’s real exports of goods were rising at a 27.5% annual rate from those of the 1st quarter, or at a pace that would add about 2.07 percentage points to 2nd quarter GDP if it were continued through May and June…..from that same table, we can figure that our 1st quarter real imports of goods averaged 290,399.3 million monthly in chained 2017 dollars, while inflation adjusted April goods imports were at 241,226 million in that same 2017 dollar representation… that would indicate that so far in the 2nd quarter, our real imports of goods have decreased at a 52.4% annual rate from those of the 1st quarter…since imports are subtracted from GDP because they allegedly represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 52.4% rate would conversely add about 6.90 percentage points to 2nd quarter GDP….hence, if the April trade deficit is maintained at the same level throughout the 2nd quarter, our improving balance of trade in goods would add about 8.97 percentage points to the growth of 2nd quarter GDP…. note that we have not estimated the impact of the change in services here, largely because the Census does not provide handy inflation adjusted data on those, but that with our nominal exports of services up by $2.1 billion while our nominal imports of services were up by $0.5 billion in April, we can figure that the change in our balance of trade in services would have a moderately positive impact on 2nd quarter GDP as well…

Construction Spending Fell 0.4% in April after February and March Figures were Revised Much Lower

The Census Bureau’s report on construction spending for April (pdf) estimated that the month’s seasonally adjusted construction spending was at a $2,152.4 billion annual rate during the month, down 0.4 percent (±0.7 percent)* from the revised March annual spending rate of $2,162.0 billion, and 0.5 percent (±1.2 percent)* below the estimated annualized level of construction spending in April of last year…the annualized March construction spending estimate was revised more than 1.5% lower, from $2,196.1 billion to $2,162.0 billion, while the annual rate of construction spending for February was revised 1.3% lower, from $2,206.9 billion to $2,178.7 billion…taken together, those $62.3 billion annualized downward revisions would suggest an downward revision of $20.8 billion to first quarter construction spending on a annualized basis (one-third of cumulative monthly annualized figures equals a quarterly annualized rate), which would in turn subtract 0.33 percentage points, give or take, from 1st quarter GDP when the third estimate is released at the end of June…

A further breakdown of the different subsets of construction spending are provided by a Census summary, which precedes the detailed spreadsheets, and is included below:

• Private Construction – Spending on private construction was at a seasonally adjusted annual rate of $1,638.9 billion, 0.7 percent (±0.7 percent)* below the revised March estimate of $1,650.8 billion. Residential construction was at a seasonally adjusted annual rate of $892.8 billion in April, 0.9 percent (±1.3 percent)* below the revised March estimate of $900.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $746.0 billion in April, 0.5 percent (±0.7 percent)* below the revised March estimate of $750.1 billion.
• Public Construction - In April, the estimated seasonally adjusted annual rate of public construction spending was $513.5 billion, 0.4 percent (±1.3 percent)* above the revised March estimate of $511.3 billion. Educational construction was at a seasonally adjusted annual rate of $110.9 billion, 0.1 percent (±1.5 percent)* below the revised March estimate of $111.0 billion. Highway construction was at a seasonally adjusted annual rate of $146.3 billion, 0.5 percent (±4.1 percent)* above the revised March estimate of $145.5 billion.

This construction spending report is used as source data for 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and as government investment outlays, for both state and local and Federal governments…however, getting an accurate read on the impact of April’s construction spending reported in this release on 2nd quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…there are many different price indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf) that are used by the BEA to make those inflation adjustments, so in lieu of trying to adjust for price changes for all of those types of construction separately the way the BEA will do, we’ve opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an estimate…that index showed that aggregate construction costs were down by 0.4% from March to April, up by 0.3% from February to March and unchanged from January to February….

On that basis, we can estimate that April’s construction costs were roughly 0.1% less than those of February and also 0.1% less than those of January, and 0.4% less than those of March….we then use those crude percentage differences to deflate spending for each of those three months, which is arithmetically the same as inflating April construction spending against the first quarter, for comparison purposes….annualized construction spending in millions of dollars for the first quarter months is given as 2,162,046 for March, 2,178,718 for February, and 2,194,337 for January….thus to compare April’s annualized construction spending of $2,099,039 million to our ‘inflation adjusted’ figures of the first quarter, our calculation is: 2,152,380 / (( 2,162,046 * 0.996 + 2,178,718 * 0.999 + 2,194,337 * 0.999) / 3) = 0.99004, meaning real construction spending in April was down roughly 0.09957% vis a vis the 1st quarter, or down at a 3.92% annual rate….to estimate the potential effect of that change on 2nd quarter GDP, we take the annualized difference between the first quarter average inflation adjusted construction spending and April’s spending as a fraction of the annualized 1st quarter GDP figure, and find from that estimate that real April construction spending was falling at a rate that would subtract about 0.39 percentage points from the growth rate of 2nd quarter GDP, in the unlikely event that May and June’s inflation adjusted construction is little changed from that of April…

Factory Shipments Fell 0.3% in April, Factory Inventories Fell 0.1%

The April Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods decreased by $22.8 billion or 3.7 percent to $594.6 billion in April, the first increase in five months, following an increase of 3.4% to $617.4 billion in March, which was originally reported as a 4.3 percent increase to $618.8 billion last month….note that other than the usual monthly revisions to the underlying data, this month’s report also reflects the May 16th re-benchmarking of shipments and inventories data from January 2012 through March 2025, and then the adjusting of the new orders data to be consistent with the re-benchmarked shipments and unfilled orders data…

However, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched “factory orders report”, and uses non-durables shipments data in its place instead, we believe that this month’s “new orders” and “unfilled orders” sections of this report are really only useful as a revised update to the April advance report on durable goods we reported on a week ago… for 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 April, down following four consecutive monthly increases, decreased $22.8 billion or 3.7 percent to $594.6 billion, the U.S. Census Bureau reported today. This followed a 3.4 percent March increase. Shipments, down two consecutive months, decreased $1.8 billion or 0.3 percent to $598.9 billion. This followed a 0.2 percent March decrease. Unfilled orders, up eleven of the last twelve months, increased $0.7 billion or virtually unchanged to $1,408.5 billion. This followed a 1.6 percent March increase. The unfilled orders-to-shipments ratio was 6.77, down from 6.86 in March. Inventories, down following six consecutive monthly increases, decreased $0.5 billion or 0.1 percent to $943.6 billion. This followed a 0.1 percent March increase. The inventories-to-shipments ratio was 1.58, up from 1.57 in March.
• New orders for manufactured durable goods in April, down following four consecutive monthly increases, decreased $20.0 billion or 6.3 percent to $296.2 billion, unchanged from the previously published decrease. This followed a 7.6 percent March increase. Transportation equipment, also down following four consecutive monthly increases, drove the decrease, $20.4 billion or 17.1 percent to $98.7 billion. New orders for manufactured nondurable goods decreased $2.8 billion or 0.9 percent to $298.4 billion.
• Shipments of manufactured durable goods in April, up five consecutive months, increased $1.0 billion or 0.3 percent to $300.5 billion, down from the previously published 0.4 percent increase. This followed a 0.2 percent March increase. Transportation equipment, up four of the last five months, drove the increase, $1.4 billion or 1.4 percent to $97.8 billion. Shipments of manufactured nondurable goods, down two consecutive months, decreased $2.8 billion or 0.9 percent to $298.4 billion. This followed a 0.7 percent March decrease. Petroleum and coal products, also down two consecutive months, led the decrease, $2.6 billion or 4.6 percent to $54.6 billion.
• Unfilled Orders for manufactured durable goods in April, up eleven of the last twelve months, increased $0.7 billion or virtually unchanged to $1,408.5 billion, unchanged from the previously published increase. This followed a 1.6 percent March increase. Transportation equipment, up two consecutive months, drove the increase, $0.9 billion or 0.1 percent to $850.9 billion.
• Inventories of manufactured durable goods in April, up seven consecutive months, increased $0.9 billion or 0.2 percent to $586.8 billion, up from the previously published 0.1 percent increase. This followed a 0.1 percent March increase. Transportation equipment, up five of the last six months, led the increase, $0.2 billion or 0.1 percent to $188.5 billion. Inventories of manufactured nondurable goods, down following five consecutive monthly increases, decreased $1.4 billion or 0.4 percent to $356.7 billion. This followed a 0.1 percent March increase. Petroleum and coal products, down two consecutive months, led the decrease, $1.2 billion or 2.5 percent to $44.6 billion. By stage of fabrication, April materials and supplies increased 0.7 percent in durable goods and decreased 0.2 percent in nondurable goods. Work in process increased 0.1 percent in durable goods and decreased 1.7 percent in nondurable goods. Finished goods decreased 0.5 percent in durable goods and 0.1 percent in nondurable goods.

To estimate the effect of those April factory inventories on 2nd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the total value of finished goods inventories was 0.3% lower at $330,645 million; the value of work in process inventories also fell 0.3% to $261,189 million, while the value of materials and supplies inventories was 0.4% higher at $351,728 million…the April producer price index reported that prices for finished good were on average unchanged, that prices for intermediate processed goods were on average 0.2% higher, and that prices for unprocessed goods were 3.2% lower on a 4.9% drop in prices for crude oil….assuming similar valuations for like types of inventories, those prices would suggest that April’s real finished goods inventories were 0.3% lower than those of March, that real inventories of intermediate processed goods were roughly 0.5% lower, and that real raw material inventory inventories were also lower, even after the price of oil is pulled out…since real NIPA factory inventories were quite a bit higher in the 1st quarter, accounting for half of the 1st quarter inventory jump, and this report seems to indicate a modest decrease in April’s real inventories, it appears that the real change in factory inventories indicated here would have a major negative impact on the growth rate of 2nd quarter GDP, first by reversing the first quarter increase, then by subtracting the modest second quarter decrease, from the growth rate of 2nd quarter GDP…

 

 

(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 chosen from the aforementioned GGO posts, contact me…)