January’s producer prices; December’s construction spending, factory inventories, and wholesale trade

Major economic reports released the past week included the Producer Price Index for January, and three December reports that included metrics that were only estimated in last week’s 4th quarter GDP release:the November and December reports on Construction Spending, the Full Report on Manufacturers’ Shipments, Inventories and Orders for December, and the December report on Wholesale Trade, Sales and Inventories, with all of those from the Census Bureau….

In addition, last week also saw the release the last three regional Fed manufacturing surveys for February: the Kansas City Fed manufacturing survey for February, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to 5 in February, up from 0 in January and 0 in December, indicating that a small plurality that region’s manufacturers saw improving business conditions in February; the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index decreased to −10 in February from −6 in January and from -7 in December, indicating that a larger plurality of that region’s manufactures saw deteriorating business conditions in February than saw deteriorating conditions over the two prior months, while the Dallas Fed Texas Manufacturing Outlook Survey, covering Texas and adjacent counties in northwest Louisiana and southeast New Mexico, reported their general business activity composite index edged up to +0.2 in February from -1.2 in January, with the near-zero reading indicating almost no change in business activity from January…

Producer Price Index Rose 0.5% in January on Higher Prices for Core Goods, Trade and Transportation Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.5% in January, even though the final demand price index for wholesale goods was 0.3% lower, as the more heavily weighted price index for final demand for services was 0.8% higher….that January PPI increase 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 0.7% higher, and followed a revised 0.2% PPI increase in November, when the final demand price index for wholesale goods was 0.7% higher, while the price index for final demand for services was 0.1% higher, and followed the report of an 0.1% 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 revised 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.% increase in 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 2.9% higher than a year ago, while the core producer price index, which excludes food, energy and trade services, was 0.3% higher for the month, and is 3.4% higher than it was a year ago…

As noted, the producer price index for final demand for goods was 0.3% lower in January, after being 0.1% lower in December, 0.7% higher in November, 0.2% 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 in March, 0.3% higher in February, and 0.6% higher last January, and is now 1.6% higher than a year ago….the final demand goods price index was 0.3% lower in January as the price index for wholesale energy goods was 1.4% lower, after it had been 1.5% lower in December, 3.2% higher in November, 2.2% lower in October, 2.0% higher in September, 0.3% lower in August, 0.7% higher in July, 1.1% higher in June, 0.4% lower in May, 0.2% lower in April, 3.0% lower last March, 1.2% lower last February, and 2.0% higher last January, and as the price index for wholesale foods was 0.3% lower, after it had been unchanged in November, 0.6% lower in October, 0.9% higher in September, unchanged in August, 1.4% higher in July, and 0.2% higher in June, while the index for final demand for core wholesale goods (excluding food and energy) was 0.7% higher in January, after it had been 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 2.7% lower in January on a 18.6% decrease in wholesale prices for natural gas liquids, a 5.5% decrease in wholesale prices for gasoline, and a 6.5% decrease in wholesale prices for home heating oil and distillates, while the final demand for food price index was 1.5% lower on a 63.9% decrease the wholesale price index for eggs for fresh use, a 5.7% decrease the wholesale price index for fresh and dry vegetables, and a 10.5% decrease in the wholesale price index for fresh fruits and melons… among core wholesale goods, the wholesale price index for search, detection, navigation, and guidance systems rose 15.5%, the wholesale price index for metal cutting machine tools rose 5.6%, the wholesale price index for communication and related equipment rose 8.6%, the wholesale price index for jewelry, platinum and karat gold rose 6.3%, and the wholesale price index for nonferrous metals was 4.8% higher…

Meanwhile, the price index for final demand for services was 0.8% higher in January, after being 0.7% higher in December, 0.1% higher 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. 0.1% higher last February, and 0.6% higher last January, and is now 3.4% higher than a year ago….the price index for final demand for trade services rose 2.5%, and the price index for final demand for transportation and warehousing services rose 1.0%, while the core index for final demand for services other than trade, transportation, and warehousing services was unchanged….

Among trade services, seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers rose 8.8%, margins for computer hardware, software, and supplies retailers were 4.7% higher, margins for health, beauty, and optical goods retailers were 3.2% higher, margins for TV, video, and photographic equipment and supplies retailers were 5.1% higher, margins for chemicals and allied products wholesalers were 8.4% higher, and margins for professional and commercial equipment wholesalers were 14.4% higher, but margins for hardware, building materials, and supplies retailers were 2.8% lower….among transportation and warehousing services, average margins for truck transportation of freight were 0.7% higher and margins for airline passenger services were 2.6% higher….among the components of the core final demand for services index, the price index for application software publishing rose 4.7%, the price index for bundled wired telecommunications access services rose 5.8%, and the price index for passenger car rental rose 7.6%, while the price index for system software publishing fell 12.2%, the price index for cable and satellite subscriber services fell 3.3%, and the price index for traveler accommodation services was 4.1% lower…

This report also showed the price index for intermediate processed goods was unchanged in January, after being unchanged in December, 0.5% 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 in April….the price index for intermediate energy goods fell 2.0% in January as refinery prices for gasoline fell 5.5%, refinery prices for jet fuel fell 4.6%, and producer prices for natural gas liquids were 18.6% lower….at the same time, the price index for intermediate processed foods and feeds fell 0.6%, as the producer price index for dairy products fell 1.9%, and the producer price index for refined sugar and byproducts was 0.9% lower… on the other hand, the core price index for intermediate processed goods less food and energy goods was 0.5% higher, as the producer price index for paint materials rose 10.4%, the producer price index for industrial gases rose 11.2%, the producer price index for copper and brass mill shapes rose 4.9%, the producer price index for secondary nonferrous metals rose 9.6%, and the producer price index for nonferrous wire and cable was 4.0% higher….average prices for intermediate processed goods were still 2.6% higher than in January 2025, the 15th year over year increase in 35 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 2.3% in January, after rising 1.9% in December and 1.2% in November, falling 1.3% in October, falling 0.5% in September, falling 1.8% in August, after rising 1.3% in July and 2.2% in June….that was as the January price index for crude energy goods rose 0.4%, as crude oil prices rose 1.8%, unprocessed natural gas prices fell 2.9% and coal prices were 1.2% higher… at the same time, the price index for unprocessed foodstuffs and feedstuffs was 3.5% lower, as the producer price index for slaughter turkeys fell 2.5%, the producer price index for oilseeds fell 7.7%, the producer price index for corn fell 6.5%, and the producer price index for raw milk was 9.8% lower….meanwhile, the index for core raw materials other than food and energy materials was 2.6% higher, on a 6.4% increase in the price index for copper base scrap, a 5.9% increase in the price index for aluminum base scrap, a 3.2% increase in the price index for iron and steel scrap, and a 5.2% increase in the price index for nonferrous metal ores….because last January’s 5.5% increase dropped out of the year over year comparison, this raw materials price index is now 6.1% lower than a year ago, the 24th year over year decrease in the past 36 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 0.3% higher in January, after being 0.6% higher in December, 0.2% higher in November, 0.3% 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 1.6% higher, as margins for chemicals and allied products wholesalers rose 8.4%, margins for building materials, paint, and hardware wholesalers rose 1.7%, and margins for intermediate automotive parts, including tire retailers were 1.4% higher….at the same time, the price index for transportation and warehousing services for intermediate demand was 0.5% higher, as the intermediate price index for transportation of passengers rose 2.6%, the intermediate price index for truck transportation of freight rose 0.7%, the intermediate price index for water transportation of freight rose 1.2%, and the intermediate index for warehousing, storage, and related services was 2.4% higher….meanwhile, the core price index for intermediate services other than trade, transportation, and warehousing services was unchanged, as the intermediate price index for nonresidential property management fees rose 2.7%, intermediate price index for bundled wired telecommunication access services rose 5.8%, and the intermediate price index for passenger car rental was 7.6% higher, while the intermediate price index for radio advertising time sales fell 26.2%, the intermediate price index for internet advertising sales fell 8.1%, and the intermediate price index for business loans (partial) was 7.5% lower….over the 12 months ended in January, price index for services for intermediate demand was 2.9% higher than it was a year earlier, the sixty-third 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…

Construction Spending Rose 0.3% in December after Falling 0.2% in November

Note: Like the Census Bureau’s reports on housing, this December report on Construction Spending incorporates initial estimates for both November’s and December’s construction spending, in an attempt to catch up with the delays caused by the October-November government shutdown.

The Census Bureau’s report on construction spending for December (pdf) estimated that the month’s seasonally adjusted construction spending would work out to $2,168.8 billion annually if extrapolated over an entire year, which was 0.3 percent (± 0.5 percent)* above the initial November estimate of a $2,163.1 billion annual rate, but 0.4 percent (±1.0 percent)* below the estimated annualized level of construction spending in December of last year…the annual rate of construction spending for October was revised about 0.3% lower, from $2,175.2 billion to $2,167.9 billion…for all of 2025, construction spending totaled $1,647.5 billion, 2.9 percent (±0.8 percent) below the $1,696.0 billion spent in 2024…

A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:

• Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,647.1 billion, 0.5 percent (±0.5 percent)* above the November estimate of $1,638.8 billion. Residential construction was at a seasonally adjusted annual rate of $916.2 billion in December, 1.5 percent (±1.3 percent) above the November estimate of $902.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $730.9 billion in December, 0.7 percent (±0.5 percent) below the November estimate of $736.3 billion.
• The value of private construction in 2025 was $1,647.5 billion, 2.9 percent (±0.8 percent) below the $1,696.0 billion spent in 2024. Residential construction in 2025 was $905.2 billion, 2.6 percent (±2.1 percent) below the 2024 figure of $929.5 billion and nonresidential construction was $742.4 billion, 3.1 percent (±0.8 percent) below the $766.5 billion in 2024.
• Public Construction: In December, the estimated seasonally adjusted annual rate of public construction spending was $521.7 billion, 0.5 percent (±0.8 percent)* below the November estimate of $524.3 billion. Educational construction was at a seasonally adjusted annual rate of $114.0 billion, 0.8 percent (±1.3 percent)* below the November estimate of $114.9 billion. Highway construction was at a seasonally adjusted annual rate of $141.4 billion, 0.3 percent (±2.1 percent)* below the November estimate of $141.8 billion.
• The value of public construction in 2025 was $516.8 billion, 3.6 percent (±1.8 percent) above the $498.7 billion spent in 2024. Educational construction in 2025 was $113.0 billion, 0.5 percent (±3.0 percent)* above the 2024 figure of $112.4 billion and highway construction was $141.9 billion, 0.9 percent (±4.3 percent)* below the $143.2 billion in 2024.

Construction spending for all three months of the fourth quarter was lower than was estimated in the advance estimate of 4th quarter GDP last week. As we’ve already noted above, October’s annualized construction spending figure was revised $7.3 billion lower, while December’s and November’s annualized construction spending figures were unavailable to the BEA when the GDP report was released…The BEA’s key source data and assumptions (xls) accompanying last week’s 4th quarter GDP report indicates that they had estimated that November’s residential construction would increase by an annualized $1.3 billion from previously published October figures, and that December’s residential construction would decrease by an annualized $0.2 billion from the November figure…they also estimated that nonresidential construction would increase by an annualized $0.1 billion from October’s report, and that December’s non-residential construction would decrease by an annualized $0.4 billion from the November figure, and that and that November’s public construction would be unchanged from the figures shown in October’s construction spending report, and that December’s public construction would be unchanged from the November figure….hence, by totaling the changes of those BEA estimates, we find the BEA had estimated that November’s construction spending would be $1.4 higher than the previously reported October level, and that December construction spending would be $0.6 lower than that, or $0.8 billion higher than October’s original level, which has now been revised $7.3 billion lower…

Since this report indicates that total construction spending for November was $4.8 billion lower than the revised October figure, and that December was $5.7 billion higher than the November figure, that means the net of the annualized construction figures used for November in the GDP report was $13.5 billion too high, and that the net of the annualized construction figures used for December in the GDP report was $7.2 billion too high…averaging the differences between the monthly annual rates in this report and those used in the GDP report for the three months of the 4th quarter, which we need to do because the construction report figures are annualized, would mean that this report suggests that the nominal construction spending figures used as source for the 4th quarter GDP report was overestimated by $9.3 billion (at an annual rate), implying there should be a downward revision to the related GDP components at a rate that should result in a subtraction of about 0.14 percentage points from 4th quarter GDP when the 2nd estimate is released at the end of the March, an estimate that should be considered very rough, since we have only allowed for an average aggregate deflator across all three types of construction for the revisions, rather than one addressing each of the specific components revised…

Factory Shipments Rose 0.5% in December; Factory Inventories Rose 0.1%

The Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for December from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods decreased by $4.3 billion or 0.7 percent to $617.5 billion in December, following an increase of 2.7% to $621.9 billion in November, which was revised from the 2.7% increase to $621.6 billion that was reported for November’s new orders a month ago…. however, since the Census Bureau does not even collect orders data on non durable goods for this widely watched “factory orders report”, both the “new orders” and “unfilled orders” sections of this report are really only useful as revised updates to the December advance report on durable goods which was released last week…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 December, down two of the last three months, decreased $4.3 billion or 0.7 percent to $617.5 billion, the U.S. Census Bureau reported today. This followed a 2.7 percent November increase. Shipments, up two of the last three months, increased $3.1 billion or 0.5 percent to $609.2 billion. This followed a 0.2 percent November decrease. Unfilled orders, up seventeen of the last eighteen months, increased $13.4 billion or 0.9 percent to $1,527.5 billion. This followed a 1.4 percent November increase. The unfilled orders-to-shipments ratio was 7.01, down from 7.04 in November. Inventories, up three consecutive months, increased $1.0 billion or 0.1 percent to $949.6 billion. This followed a 0.2 percent November increase. The inventories-to-shipments ratio was 1.56, down from 1.57 in November.
• New Orders for manufactured durable goods in December, down two of the last three months, decreased $4.4 billion or 1.4 percent to $319.9 billion, unchanged from the previously published decrease. This followed a 5.4 percent November increase. Transportation equipment, also down two of the last three months, drove the decrease, $6.5 billion or 5.4 percent to $113.4 billion. New orders for manufactured nondurable goods increased $0.1 billion or virtually unchanged to $297.6 billion.
• Shipments of manufactured durable goods in December, up three of the last four months, increased $3.1 billion or 1.0 percent to $311.5 billion, unchanged from the previously published increase. This followed a 0.3 percent November decrease. Transportation equipment, up two of the last three months, led the increase, $1.4 billion or 1.4 percent to $102.3 billion. Shipments of manufactured nondurable goods, up following four consecutive monthly decreases, increased $0.1 billion or virtually unchanged to $297.6 billion. This followed a 0.1 percent November decrease. Chemical products, up five of the last six months, drove the increase, $0.5 billion or 0.6 percent to $82.6 billion.
• Unfilled Orders for manufactured durable goods in December, up seventeen of the last eighteen months, increased $13.4 billion or 0.9 percent to $1,527.5 billion, unchanged from the previously published increase. This followed a 1.4 percent November increase. Transportation equipment, up nine of the last ten months, led the increase, $11.1 billion or 1.2 percent to $960.7 billion.
• Inventories of manufactured durable goods in December, up three consecutive months, increased $1.5 billion or 0.3 percent to $593.6 billion, up from the previously published 0.2 percent increase. This followed a 0.2 percent November increase. Transportation equipment, also up three consecutive months, led the increase, $0.4 billion or 0.2 percent to $187.7 billion. Inventories of manufactured nondurable goods, down four of the last five months, decreased $0.5 billion or 0.2 percent to $356.0 billion. This followed a 0.1 percent November increase. Chemical products, down five consecutive months, led the decrease, $0.2 billion or 0.2 percent to $129.7 billion. By stage of fabrication, December materials and supplies were virtually unchanged in durable goods and decreased 0.5 percent in nondurable goods. Work in process increased 0.7 percent in durable goods and 3.7 percent in nondurable goods. Finished goods increased 0.1 percent in durable goods and decreased 1.4 percent in nondurable goods.

As you see above, December’s inventories of durable goods were revised from the previously published 0.2% increase to a 0.3% increase, or from the $1.2 billion increase that had been incorporated into last week’s 4th quarter GDP report to a 1.5 billion increase with this report….hence the GDP report underestimated the end of 4th quarter GDP durable factory inventory component by about $0.3 billion, or around $1.2 billion on an annualized basis, which would suggest that the change in 4th quarter GDP might have to be revised upwards by about 0.02 percentage points to account for that...on the other hand, the BEA’s key source data and assumptions (xls) for 4th quarter GDP indicates that they had estimated that the value of non-durable goods inventories would decrease by $0.5 billion on a Census basis in December before they estimated the 4th quarter’s output, so the actual $0.5 billion decrease, following an unrevised $0.2 billion increase in November’s non-durable goods inventories, matches the figures used in the GDP report…

Wholesale Sales Rose 1.0% in December; Wholesale Inventories Rose 0.2%

The December report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at “$722.1 billion, up 1.0 percent (±0.4 percent) from the revised November level and were up 5.2 percent (±0.7 percent) from the revised December 2024 level”… the November preliminary sales estimate was revised up to $714.732 billion from the $714.1 billion in sales reported last month, which meant that “The October 2025 to November 2025 percent change was revised from the preliminary estimate of up 1.3 percent (±0.4 percent) to up 1.4 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 a shelf or in intermediate storage represent goods that were produced even if they were not sold, and this December report estimated that wholesale inventories were valued at a seasonally adjusted $918.0 billion at month end, up 0.2 percent (±0.4 percent)* from the revised November level and 2.9 percent (±1.1 percent) higher than in December a year ago, with the November preliminary estimate revised higher, from $915.0 billion to $915.7 billion at the same time, but oddly enough still a rounded 0.2 percent (±0.2 percent) higher than October….

In the advance report on 4th 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 $917,242 million at the end of December, up from $915,700 million in November….that’s a net $0.737 billion less than the $917,966 billion and $915,713 billion for those two month that this report shows, which would imply that the quarterly change in 4th quarter wholesale inventories was underestimated at roughly a $2.95 billion annual rate…assuming there’s no distortion caused by reweighting the inflation adjustments to those inventories, that would suggest that the growth rate of 4th quarter GDP was underestimated by around 0.04 percentage points, just based on what this report shows…

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