June’s trade deficit, factory inventories, and wholesale sales

Major economic reports released during the past week included the Commerce Department’s report on our International Trade for June, and the Full Report on Manufacturers’ Shipments, Inventories and Orders for June and the June report on Wholesale Trade, Sales and Inventories, both of which were from the Census Bureau…..in addition, this week also saw the Consumer Credit Report for June from the Fed, which reports on non-real estate consumer borrowing, and which indicated consumer credit outstanding grew by a seasonally adjusted ​$7.4 billion in June, or at a 1.8% annual rate, as non-revolving credit grew at a 2.7% rate to $3,757.6 billion, while revolving credit outstanding fell at a 1.0% rate to $1,297.0 billion…for the second quarter, consumer credit grew at a 2.3% annual rate, with revolving credit up at an 0.7% annual and non-revolving credit up at a 2.9% annual rate….

The major private report released this week was the July 2024 Services Report On Business from the Institute for Supply Management, which saw their Services PMI fall to 50.1%, down from 50.8% in June, indicating the smallest plurality of service industry purchasing managers reported increases in various business metrics in July, after a larger small plurality had indicated increases in June..

US Trade Deficit was 16.0% Lower in June on Lower Imports of Drugs and Raw Materials

Our trade deficit decreased by 16.0% in June, after increasing by a revised 18.9% in May, as both the value our exports and our imports decreased, but the value of our imports fell by nearly ten times as much….the Commerce Department report on our international trade in goods and services for June indicated that our seasonally adjusted goods and services trade deficit fell by a rounded $11.5 billion to $60.2 billion in June from a revised May deficit of $71.7 billion, which had previously been reported at $71.5 billion.…the value of our June exports fell by a rounded $1.3 billion to $277.3 billion on a $1.2 billion decrease to $179.1 billion in our exports of goods and ​o​n a $0.2 billion decrease to $98.2 billion in our exports of services, while the value of our imports fell by a rounded $12.8 billion to $337.5 billion on a $12.6 billion decrease to $265.0 billion in our imports of goods and a $0.2 billion decrease to $72.5 billion in our imports of services…export prices were on average 0.5% higher in June, which means our real exports were 0.5% less than their nominal value, or that our real exports fell on the order of 1.0%, while import prices were 0.1​% higher, which means the decrease in the value of our imports was 0.1% greater than their real decrease and that real imports fell by about 3.8% ….

The $1.2 billion decrease in June’s exports of goods was essentially due to lower exports of industrial supplies and materials, which were partly offset by increases in exports of capital goods and consumer goods….referencing the Full Release and Tables for June (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials fell by $4,975 million to $60,415 million, led by a $4,645 million decrease in our exports of finished metal shapes, and a $1,953 million decrease in our exports of nonmonetary gold, which were partly offset by a $701 million increase in our exports of petroleum products other than fuel oil, and that our exports of other goods not categorized by end use fell by $241 million to $8,885 million….partly offsetting those decreases, the value of our exports of capital goods rose by $1,958 million to $59,395 million on a $1,571 million increase in our exports of excavating machinery, a $771 million increase in our exports of civilian aircraft, a $374 million increase in our exports of medical equipment, and a $316 million increase in our exports of semiconductors, which were partly offset by a $1,216 million decrease in our exports of computer accessories, and our exports of consumer goods rose by $1,013 million to $22,968 million o​n a $1,607 million increase in our exports of pharmaceutical preparations and a $430 million increase in our exports of artwork and other collectibles, which were partly offset by a $598 million decrease in our exports of gem diamonds and a $381 million decrease in our exports of jewelry… in addition, our exports of automotive vehicles, parts, and engines rose by $198 million to $12,723 million on a $355 million increase in our exports of passenger cars, and our exports of foods, feeds and beverages rose by $622 million to $13,699 million on higher exports of corn, soybeans, fish and shellfish, dairy products and eggs, and other foods and feeds..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports ​of goods​, and shows that lower imports of consumer goods, industrial supplies and materials, and automotive products were responsible for the decrease in our June imports, and that their decrease was partly offset by higher imports of capital goods.…our imports of consumer goods fell by $8,352 million to $57,588 million as a $9,617 million decrease in our imports of pharmaceutical preparations and a $421 million decrease in our imports of artwork and other collectibles was partly offset by a $658 million increase in our imports of cell phones, while our imports of industrial supplies and materials fell by $2,679 million to $48,373 million on a $1,034 million decrease in our imports of crude oil, a $426 million decrease in our imports of nuclear fuel materials, a $315 million decrease in our imports of copper, and a $303 million decrease in our imports of organic chemicals, which were partly offset by a $461 increase in our imports of petroleum products other than fuel oil….in addition, our imports of automotive vehicles, parts, and engines fell by $1,325 million to $35,325 million on a $1,105 million decrease in our imports of passenger cars, our imports of foods, feeds, and beverages fell by $276 million to $17,245 million, and our imports of other goods not categorized by end use fell by $629 million to $12,097 million…partly offsetting the decreases in those import categories, our imports of capital goods rose by $614 million to $91,493 million on a $491 million increase in our imports of electric apparatuses and a $393 million increase in our imports of semiconductors…

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

The June figures show surpluses, in billions of dollars, with Netherlands ($6.2), South and Central America ($4.4), United Kingdom ($2.2), Australia ($1.6), Hong Kong ($1.6), Brazil ($1.3), Saudi Arabia ($0.3), Singapore ($0.2), and Belgium ($0.1). Deficits were recorded, in billions of dollars, with Mexico ($16.3), Vietnam ($16.2), Taiwan ($12.9), European Union ($9.5), China ($9.4), Japan ($5.7), South Korea ($5.5), Ireland ($5.3), India ($5.3), Germany ($4.0), Malaysia ($3.1), Italy ($1.6), Canada ($1.3), France ($0.7), Israel ($0.1), and Switzerland (less than $0.1).

• The deficit with Ireland decreased $6.5 billion to $5.3 billion in June. Exports decreased $0.2 billion to $1.4 billion and imports decreased $6.7 billion to $6.7 billion.
• The deficit with China decreased $4.6 billion to $9.4 billion in June. Exports increased $3.1 billion to $10.1 billion and imports decreased $1.4 billion to $19.4 billion.
• The balance with Switzerland shifted from a surplus of $3.3 billion in May to a deficit of less than $0.1 billion in June. Exports decreased $2.4 billion to $4.1 billion and imports increased $0.9 billion to $4.1 billion.

In the advance report on 2nd quarter GDP released last week, our June goods trade was estimated based on the​ sketchy Advance Report on our International Trade in Goods from the Census Bureau, which was also released that week, coincident with the GDP release…that report estimated that our June goods trade deficit was at $85,988 million on a Census basis, down from the $96,423 million goods deficit then reported for May….Exhibit 5 in this report revises those figures and shows that our actual goods trade deficit in June was at $85,879 million on a balance of payments basis, and $84,854 million on a Census basis, and that the May goods deficit was revised to $96,211 million on a Census basis…together, those revisions from the previously published data mean that the 2nd quarter goods trade deficit in goods was roughly $1,346 million less than the estimates that were used in the GDP report, or about $5.38 billion​ less at an annual rate, before adjusting for price changes…that change would indicate an upward revision of roughly 0.09 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August…

Factory Shipments Rose 0.5% in June, Factory Inventories were 0.2% Higher

The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $30.9 billion or 4.8 percent to $611.7 billion in June, following an increase of 8.3% to $642.5 billion in May, which was revised from the 8.2% increase to $642.0 billion reported for May 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 a revised update to the advance report on durable goods we reported on two weeks ago.…on those revisions, the Census Bureau’s own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we’ll just quote directly from that here:

• Summary: New orders for manufactured goods in June, down two of the last three months, decreased $30.9 billion or 4.8 percent to $611.7 billion, the U.S. Census Bureau reported today. This followed an 8.3 percent May increase. Shipments, up two consecutive months, increased $2.9 billion or 0.5 percent to $602.4 billion. This followed a 0.2 percent May increase. Unfilled orders, up eleven of the last twelve months, increased $14.3 billion or 1.0 percent to $1,469.9 billion. This followed a 3.4 percent May increase. The unfilled orders-to-shipments ratio was 7.03, up from 6.98 in May. Inventories, up eight of the last nine months, increased $1.6 billion or 0.2 percent to $945.6 billion. This followed a 0.1 percent May increase. The inventories-to-shipments ratio was 1.57, unchanged from May.
• New Orders for manufactured durable goods in June, down two of the last three months, decreased $32.3 billion or 9.4 percent to $311.8 billion, down from the previously published 9.3 percent decrease. This followed a 16.5 percent May increase. Transportation equipment, also down two of the last three months, drove the decrease, $32.6 billion or 22.4 percent to $113.1 billion. New orders for manufactured nondurable goods increased $1.4 billion or 0.5 percent to $299.9 billion.
• Shipments of manufactured durable goods in June, up seven consecutive months, increased $1.5 billion or 0.5 percent to $302.5 billion, unchanged from the previously published increase. This followed a 0.3 percent May increase. Transportation equipment, up six of the last seven months, led the increase, $0.8 billion or 0.8 percent to $99.0 billion. Shipments of manufactured nondurable goods, up two consecutive months, increased $1.4 billion or 0.5 percent to $299.9 billion. This followed a 0.1 percent May increase. Petroleum and coal products, up following three consecutive monthly decreases, led the increase, $0.7 billion or 1.4 percent to $55.2 billion.
• Unfilled Orders for manufactured durable goods in June, up eleven of the last twelve months, increased $14.3 billion or 1.0 percent to $1,469.9 billion, unchanged from the previously published increase. This followed a 3.4 percent May increase. Transportation equipment, up four consecutive months, led the increase, $14.1 billion or 1.6 percent to $911.8 billion.
• Inventories of manufactured durable goods in June, up nine consecutive months, increased $0.9 billion or 0.2 percent to $588.6 billion, unchanged from the previously published increase. This followed a 0.2 percent May increase. Machinery, up four consecutive months, led the increase, $0.4 billion or 0.4 percent to $102.1 billion. Inventories of manufactured nondurable goods, up following two consecutive monthly decreases, increased $0.7 billion or 0.2 percent to $357.0 billion. This followed a 0.1 percent May decrease. Petroleum and coal products, up following three consecutive monthly decreases, led the increase, $0.2 billion or 0.5 percent to $44.1 billion. By stage of fabrication, June materials and supplies increased 0.3 percent in durable goods and were virtually unchanged in nondurable goods. Work in process increased 0.1 percent in durable goods and 0.9 percent in nondurable goods. Finished goods increased 0.1 percent in both durable goods and nondurable goods.

The BEA’s key source data and assumptions (xls) for the advance estimate of second quarter GDP indicated on line 143 that they had estimated that the value of durable goods inventories would increase $0.9 billion before any inflation adjustment in June, and this report indicates that total durable goods inventories actually increased in value by $0.9 billion; in addition, on line 144 of the BEA’s GDP source data, they estimated that nondurable goods inventories rose by $0.8 billion in June, while this report indicates that nondurable goods inventories rose by $0.7 billion…hence, this report thus shows that the BEA had overestimated the change in the 2nd quarter GDP inventory component by around $0.1 billion before an inflation adjustment, or by around $0.4 billion on an annualized basis, which would suggest that 2nd quarter GDP might have to be revised downwards by 0.01 percentage points to account for what this report shows…

Wholesale Sales Rose 0.3% in June, Wholesale Inventories Rose 0.1%

The June report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $698.5 billion in June, up 0.3 percent (±0.5 percent)* from the revised May level, and were up 5.5 percent (±0.9 percent) from the value of wholesale sales of June 20234.…the May preliminary estimate was revised to $696.65 billion from the $697.2 billion in sales reported last month, and as a result the April to May percent change was revised from the preliminary estimate of down 0.3 percent (±0.4 percent)* to​ down 0.4 percent (±0.4 percent)*….as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold…

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this June report estimated that wholesale inventories were valued at a seasonally adjusted $906.3 billion at month end, up 0.1 percent (±0.2 percent)* from the revised May level, and 1.3 percent (±0.5%) higher than in June a year ago, with the May preliminary estimate statistically unrevised from the $905.5 billion reported last month to , still a 0.3% decrease from April…

In the advance report on 2nd 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 $907,676 million at the end of June, up from $906,010 million in May….those figures total $1,879 million more than the $906,349 million for June and $905,458 million for May that this report shows, which means that the quarterly increase in 2nd quarter wholesale inventories used in the GDP report was overestimated at about a $7.52 billion annual rate…assuming there’s no revision or imbalance in the inflation adjustment to those inventories, that would suggest that the growth rate of 2nd quarter GDP was overestimated by around 0.12 percentage points, just based on what this wholesale 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 chosen from the aforementioned GGO posts, contact me…)