February's producer prices & industrial production; January's factory inventories, wholesale trade, and new home sales

Major economic reports released last week included the Producer Price Index for February from the Bureau of Labor Statistics, the February report on Industrial Production and Capacity Utilization from the Fed, and the January report on new home sales, the Full Report on Manufacturers’ Shipments, Inventories and Orders for January, and the January report on Wholesale Trade, Sales and Inventories, all from the Census Bureau….

This week also saw the release of the first two regional Fed manufacturing surveys for March: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +7.1 in February to –0.2 in March, with the near zero reading meaning that that region’s manufacturers were virtually evenly split between those who reported improving conditions and those who saw deteriorating conditions in March, after a modest plurality thought things were getting better in February…meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from +16.3 in February to +18.1 in March, indicating that a larger majority of that region’s manufacturing firms are seeing increased activity this month than last…

Producer Price Index Rose 0.7% in February on Higher Prices for Food, Energy and Core Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.7% in February, as the final demand price index for wholesale goods rose 1.1% and the more heavily weighted price index for final demand for services was 0.5% higher….that February PPI increase followed a revised 0.5% increase in January, when the final demand price index for wholesale goods was 0.2% lower, but the price index for final demand for services was 0.8% higher, and followed a revised 0.4% PPI increase in December, when the final demand price index for wholesale goods was 0.1% lower, while the price index for final demand for services was 0.6% higher, and a revised 0.3% PPI increase in November, when the final demand price index for wholesale goods was 0.8% higher, and the price index for final demand for services was unchanged, and followed the report of a 0.1% PPI increase in October, when the final demand price index for wholesale goods fell 0.2%, but the more heavily weighted price index for final demand for services was 0.2% higher, and also followed a 0.6% PPI increase in September, when the final demand price index for wholesale goods rose 0.6% and the price index for final demand for services was also 0.6% higher….those post-shutdown reports followed a revised 0.2% decrease in August, when the final demand price index for wholesale goods rose 0.2%, but the more heavily weighted price index for final demand for services was 0.3% lower, and also followed a revised 0.8% increase in July, when the final demand price index for wholesale goods rose 0.6% and the price index for final demand for services was was 0.9% higher, and followed a 0.2% PPI increase in June, when the final demand price index for wholesale goods rose 0.3%, while the price index for final demand for services was 0.1% higher, and a 0.3% increase last May, when the final demand price index for wholesale goods was 0.1% higher, and the price index for final demand for services 0.4% higher….on an unadjusted basis, producer prices are now 3.4% higher than a year ago, while the core producer price index, which excludes food, energy and trade services, was 0.5% higher for the month, and is 3.5% higher than it was a year ago…

As noted, the producer price index for final demand for goods was 1.1% higher in February, after being 0.2% lower in January, 0.1% lower in December, 0.8% higher in November, 0.1% lower in October, 0.6% higher in September, 0.2% lower in August, 0.6% higher in July, 0.3% higher in June, 0.1% higher in May, 0.1% lower in April, 0.7% lower last March, and 0.3% higher last February, and is now 2.5% higher than a year ago….the final demand goods price index was 1.1% higher in February, as the price index for wholesale energy goods was 2.3% higher, after energy prices had been 2.3% lower in January, 1.5% lower in December, 3.5% higher in November, 2.2% lower in October, and 2.0% higher in September, and as the price index for wholesale foods was 2.4% higher, after wholesale foods had been had been 1.4% lower in January, 0.2% lower in December, 0.1% higher in November, 0.4% lower in October, and 0.8% higher in September, while the index for final demand for core wholesale goods (excluding food and energy) was 0.3% higher in February, after it had been 0.7% higher in January, 0.4% higher in December, 0.2 higher in November, 0.5% higher in October, and 0.2% higher in September….

Wholesale energy prices were 2.3% higher in February on a 6.6% increase in wholesale prices for natural gas liquids, a 1.8% increase in wholesale prices for gasoline, and a 13.9% increase in wholesale prices for No. 2 diesel fuel, while the final demand for food price index was 2.4% higher on a 93.6% increase the wholesale price index for eggs for fresh use, a 48.9% increase the wholesale price index for fresh and dry vegetables, and a 10.3% increase in the wholesale price index for fresh fruits and melons… among core wholesale goods, the wholesale price index for electronic components and accessories rose 10.3%, the wholesale price index for iron and steel scrap rose 5.0%, the wholesale price index for paper industries machinery rose 1.5%, the wholesale price index for industrial chemicals rose 1.3%, and the wholesale price index for cigarettes was 2.9% higher…

Meanwhile, the price index for final demand for services was 0.5% higher in February, after being 0.8% higher in January, 0.6% higher in December, unchanged in November, 0.2% higher in October, 0.6% higher in September, 0.3% lower in August, 0.9% higher in July, 0.1% higher in June, 0.4% higher in May, 0.3% lower in April, 0.1% higher in March. and 0.1% higher last February, and is now 3.8% higher than a year ago….the price index for final demand for trade services rose 0.4%, and the price index for final demand for transportation and warehousing services rose 0.5%, and the core index for final demand for services other than trade, transportation, and warehousing services was 0.6% higher….

Among trade services, seasonally adjusted margins for fuels and lubricants retailers rose 11.4%, margins for computer hardware, software, and supplies retailers were 5.0% higher, margins for sporting good and boat retailers were 5.7% higher,  margins for furniture retailers were 2.4% higher, and margins for food and alcohol wholesalers were 4.6% higher, but margins for TV, video, and photographic equipment and supplies retailers were 10.0% lower….among transportation and warehousing services, average margins for truck transportation of freight were 1.2% higher but margins for airline passenger services were 0.6% lower….among the components of the core final demand for services index, the price index for application software publishing rose 2.3%, the price index for cable and satellite subscriber services rose 2.8%, the price index for securities brokerage, dealing, investment advice, and related services rose 4.2%, and the price index for traveler accommodation services was 5.7% higher…

This report also showed the price index for intermediate processed goods was 1.6% higher in February, after being 0.1% higher in January, 0.1% higher in December, 0.6% higher in November, 0.1% lower in October, 0.2% higher in September, 0.4% higher in August, 0.7% higher in July, 0.1% lower in June, 0.2% higher in May, and 0.3% higher last April….the price index for intermediate energy goods rose 5.5% in February as refinery prices for No. 2 diesel fuel rose 13.9%, refinery prices for jet fuel rose 13.2%, and producer prices for natural gas to electric utilities were 16.7% higher….at the same time, the price index for intermediate processed foods and feeds rose 0.3%, as the producer price index for meats rose 1.4%, the producer price index processed poultry rose 1.5%, and the producer price index for fats and oils was 3.3% higher… in addition, the core price index for intermediate processed goods less food and energy goods was 0.8% higher, as the producer price index for nitrogenates rose 3.1%, the producer price index for synthetic rubber rose 3.3%, the producer price index for aluminum mill shapes rose 5.7%, the producer price index for building paper and board rose 8.3%, and the producer price index for intermediate electronic components and accessories was 10.3% higher….average prices for intermediate processed goods were now 4.0% higher than in February 2025, the 16th year over year increase in 36 months, but are way off the 26.6% year over year increase of November 2021, which had been a 46 year high…

Meanwhile, the price index for intermediate unprocessed goods rose 3.1% in February, after rising 0.9% in January, 2.1% in December and 1.3% in November, after falling 1.3% in October, falling 0.5% in September, falling 1.8% in August, after rising 1.3% in July and 2.2% last June….that was as the January price index for crude energy goods rose 6.0%, as crude oil prices rose 4.7%, unprocessed natural gas prices rose 10.9% and coal prices were 0.6% higher… at the same time, the price index for unprocessed foodstuffs and feedstuffs was 2.3% higher, as the producer price index for slaughter hogs rose 9.0%, the producer price index for slaughter cattle rose 5.0%, the producer price index for oilseeds rose 4.3%, the producer price index for hay and hayseeds rose 9.8%, and the producer price index for wheat was 2.4% higher….meanwhile, the index for core raw materials other than food and energy materials was 1.1% higher, on a 5.3% increase in the price index for copper base scrap, a 2.2% increase in the price index for aluminum base scrap, a 5.0% increase in the price index for iron and steel scrap, and a 2.4% increase in the price index for hides and skins….this raw materials price index is still 1.7% lower than a year ago, the 25th year over year decrease in the past 37 months, which followed a run of twenty-seven consecutive year over year increases, which came after the annual change on this index had been negative from the beginning of 2019 through October of 2020…

Lastly, the price index for services for intermediate demand was 0.8% higher in February, after being 0.6% higher in January, 0.5% higher in December, 0.2% higher in November, 0.4% higher in October, 0.3% higher in September, unchanged in August, 0.6% higher in July, 0.1% higher in June, and 0.1% higher in May.…the price index for intermediate trade services was 1.0% higher, as margins for food wholesalers rose 5.0%, margins for metals, minerals, and ores wholesalers rose 1.7%, and margins for machinery and equipment parts and supplies wholesalers were 0.6% higher….at the same time, the price index for transportation and warehousing services for intermediate demand was 0.8% higher, as the intermediate price index for truck transportation of freight rose 1.2%, the intermediate price index for the U.S. Postal Service rose 0.6%, and the intermediate index for warehousing, storage, and related services was 0.8% higher….meanwhile, the core price index for intermediate services other than trade, transportation, and warehousing services was 0.7% higher, as the intermediate price index for radio advertising time sales rose 5.8%, the intermediate price index for cable and satellite subscriber services rose 2.8%, intermediate price index for securities brokerage, dealing, investment advice, and related services rose 4.2%, and the intermediate price index for traveler accommodation services was 5.7% higher….over the 12 months ended in February, price index for services for intermediate demand was 3.7% higher than it was a year earlier, the sixty-fourth consecutive annual increase in this index, after it had briefly turned negative year over year at the onset of the pandemic, from April to August of 2020, even as the current annual increase is still much lower than the record 9.5% year over year increase that was indicated for July 2021…

Industrial Production Rose 0.2% in February on Increase in Vehicle Output

The Fed’s February report on Industrial production and Capacity Utilization indicated that industrial production was 0.2%  higher in February, after rising by a revised 0.7% in January, and by a revised 0.3% in December, which left our industrial output 1.4% higher than in February a year ago….the industrial production index, with the benchmark set for average 2017 production to equal to 100.0, came in at 102.6 in February, after the January index was revised from the 102.3 reported last month to 102.4, the December index was revised from 101.6 to 101.7, the November index was unchanged at the 101.4 level reported last month, and the October index was revised from 101.3 to 101.2…

The manufacturing index, which accounts for more than 77% of the total IP index, also rose by 0.2%, from 97.4 in January to 97.6 in February, boosted by an increase of 1.6% in the index for motor vehicles and parts.…that came after the manufacturing index for January was revised from 97.3 to 97.4, the manufacturing index for December index was revised down from 96.9 to 96.6, the manufacturing index for November index was unrevised at 96.9, the manufacturing index for October index was unrevised at 96.6, and the manufacturing index for September index was revised from 97.4 to 97.3, leaving the manufacturing index 1.3% above its year ago level….meanwhile, the mining index, which includes oil and gas well drilling, rose 0.8% in a partial recovery from January’s well freeze-offs, from 119.9 in January to 120.9 in February, after the January mining index was revised down from 120.1, which left the mining index up 1.4% from where it was a year earlier… finally, the utility index, which often fluctuates due to above or below normal temperatures because it is seasonally adjusted to “normal”, fell by 0.6% during our closer to normal February weather, from 114.9 to 114.2, after our colder than normal January’s utility index was revised to 114.9 from 113.8, now up 0.1% from December….with last February’s temperatures closer to normal, the utility index is 2.5% higher than it was a year ago…

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry was unchanged at 76.3% in February, after capacity utilization for January was revised up from the 76.2% reported last month …capacity utilization of NAICS durable goods production facilities was unchanged at 74.2% in February, while capacity utilization for non-durables producers rose to 76.9% from a revised 76.8% in January.…capacity utilization for the mining sector rose to 85.0% in February from 84.3% in January, which was originally reported as 84.4%, while utilities were operating at 73.0% of capacity during February, down from their revised 73.7% of capacity during January, which was previously reported at 72.9%…for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories..

New Home Sales Sharply Lower on Lower Prices in January After December Sales Revised Lower

The Census report on New Residential Sales for January (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 587,000 homes annually in January, which was 17.6 percent (±13.3 percent) below the revised December annual sales rate of 712,000, and was 11.3 percent (±15.6 percent)* below the estimated 664,000 annual rate that new single family homes were selling at in January of last year….the asterisk indicates that based on their small sampling, Census could not be certain whether January new home sales rose or fell from those of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series….with this report; sales of new single family homes in December were revised from the annual rate of 745,000 reported a month ago to an annual rate of 712,000, while new home sales in November, initially reported at an annual rate of 758,000, were revised up to a 764,000 a year rate with this report, and while October’s new home sales rate, initially reported at an annual rate of 737,000 and revised to a 656,000 a year rate last month, were revised to a 650,000 rate with this release...

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 48,000 new single family homes sold in January, down from the estimated 55,000 new homes that sold in December, and down from the 53,000 that sold in November….the raw numbers from Census field agents further estimated that the median sales price of new houses sold in January was $400,500, down from the median sale price of $419,200 in December and down 6.8% from the median sales price of $429,600 in January a year ago, while the average January new home sales price was at $530,900, down from the $535,200 average sales price in December, but up 2.5% from the average sales price of $518,200 in January a year ago….a seasonally adjusted estimate of 476,000 new single family houses remained for sale at the end of January, which represents a 9.7 month supply at the January sales rate, up from the revised 8.0 months of new home supply in December, which had been reported at a 7.6 month supply before sales were revised lower…

Factory Shipments Rose 0.4% in January, Factory Inventories were 0.1% Higher

The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for January from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by a rounded $0.9 billion or by 0.1 percent to $620.1 billion in January, following a decrease of $2.7 billion or 0.4% to $619.1 billion in December, which was revised from the decrease of $4.7 billion or 0.7 percent to $617.5 billion that was reported for December a month ago….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 for their revised updates to the January advance report on durable goods, which was released last week (see below)….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 January, up two of the last three months, increased $0.9 billion or 0.1 percent to $620.1 billion, the U.S. Census Bureau reported today. This followed a 0.4 percent December decrease. Shipments, up three of the last four months, increased $2.8 billion or 0.5 percent to $612.9 billion. This followed a 0.7 percent December increase. Unfilled orders, up eighteen of the last nineteen months, increased $12.1 billion or 0.8 percent to $1,540.4 billion. This followed a 0.9 percent December increase. The unfilled orders-to-shipments ratio was 7.01, unchanged from December. Inventories, up four consecutive months, increased $0.7 billion or 0.1 percent to $949.8 billion. This followed a 0.1 percent December increase. The inventories-to-shipments ratio was 1.55, down from 1.56 in December.
• New Orders for manufactured durable goods in January, down three of the last four months, decreased less than $0.1 billion or virtually unchanged to $321.3 billion, unchanged from the previously published decrease. This followed a 0.9 percent December decrease. Transportation equipment, also down three of the last four months, drove the decrease, $0.9 billion or 0.8 percent to $113.5 billion. New orders for manufactured nondurable goods increased $0.9 billion or 0.3 percent to $298.7 billion.
• Shipments of manufactured durable goods in January, up four of the last five months, increased $1.9 billion or 0.6 percent to $314.1 billion, unchanged from the previously published increase. This followed a 1.2 percent December increase. Transportation equipment, up three of the last four months, led the increase, $1.0 billion or 1.0 percent to $103.5 billion. Shipments of manufactured nondurable goods, up two consecutive months, increased $0.9 billion or 0.3 percent to $298.7 billion. This followed a 0.1 percent December increase. Petroleum and coal products, up following five consecutive monthly decreases, led the increase, $0.7 billion or 1.3 percent to $51.9 billion.
• Unfilled Orders for manufactured durable goods in January, up eighteen of the last nineteen months, increased $12.1 billion or 0.8 percent to $1,540.4 billion, unchanged from the previously published increase. This followed a 0.9 percent December increase. Transportation equipment, up ten of the last eleven months, led the increase, $10.0 billion or 1.0 percent to $971.4 billion.
• Inventories of manufactured durable goods in January, up four consecutive months, increased $1.4 billion or 0.2 percent to $594.9 billion, unchanged from the previously published increase. This followed a 0.2 percent December increase. Transportation equipment, also up four consecutive months, led the increase, $0.6 billion or 0.3 percent to $188.3 billion. Inventories of manufactured nondurable goods, down five of the last six months, decreased $0.7 billion or 0.2 percent to $354.9 billion. This followed a 0.3 percent December decrease. Chemical products, down six consecutive months, led the decrease, $0.4 billion or 0.3 percent to $129.2 billion.

To gauge the effect of January’s nominal factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index…by stage of fabrication, the value of finished goods inventories was 0.3% lower at $328,820 million; the value of work in process inventories increased 0.1% to $254,862 million, and materials and supplies inventories were valued at $355,349 million, 0.4% more than December…meanwhile, the producer price index for January indicated that prices for finished goods decreased 0.2%, that prices for intermediate processed goods were 0.1% higher, and that prices for unprocessed goods were on average 0.9% higher….assuming similar valuations for like inventories, that would suggest that January’s real finished goods inventories were about 0.1% smaller December’s, that real inventories of intermediate processed goods were virtually unchanged, and that real raw material inventory inventories were around 0.5% smaller…given that, it appears that total real factory inventories were down on the order of 0.2%…since there was a sharp decrease in real factory inventories in the 4th quarter, any smaller 1st quarter decrease in real factory inventories would add to first quarter GDP an amount equal to the difference between the quarterly decreases…

January Wholesale Sales Rose 0.5%, Wholesale Inventories Fell 0.5%

The January report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at “$727.5 billion, up 0.5 percent (±0.5 percent)* from the revised December level and were up 7.5 percent (±0.9 percent) from the revised January 2025 level.”… the December preliminary estimate was revised up to $723.8 billion from the $722.1 billion sales reported last month, which meant “The November 2025 to December 2025 percent change was revised from the preliminary estimate of up 1.0 percent (±0.4 percent) to up 1.3 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 in a warehouse represent goods that were produced even if they weren’t sold, and this January report estimated that wholesale inventories were valued at $909.3 billion at month end, a decrease of 0.5 percent (±0.4 percent) from the revised December level, but 1.0 percent (±1.1 percent)* higher than January a year ago….the December preliminary inventory estimate was concurrently revised upward from $918.0 billion to $914.4 billion, now down 0.1% from November…

In national accounts data, January’s wholesale inventories will be adjusted with components of the producer price index for January to determine their real change…with notable exceptions such as farm products, chemicals and petroleum & its products, we’ve estimated that wholesale inventories appear to be roughly 70% finished goods…with the January producer price index for finished goods down by 0.2%, the producer price indexes for intermediate goods 0.1% higher, and with prices for unprocessed goods on average 0.9% higher, it appears that January’s real wholesale inventories were down a bit more than 0.5%….since real wholesale inventories were up slightly in the 4th quarter, any first quarter real wholesale inventory decease would subtract that 4th quarter increase, plus the first quarter decrease, from the growth rate of 1st 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…)