the barrage of economic releases that we had seen over the previous two weeks finally slowed to a more measured pace this week, but the week did see the release of two September reports that weren’t available to the BEA when they released the advance estimate of 3rd quarter GDP last week, so we’ll have the opportunity to see how that GDP report might be revised with the inclusion of this new data…by far the most important of those releases was the September report on our International Trade in Goods and Services, which showed that our trade deficit rose 8.0% above August;s deficit to $41.8 billion in September, which was worse than the worst forecast of 72 economists surveyed by Bloomberg and considerably higher than the assumptions used by the BEA in computing GDP…in September, total imports of goods and services increased $2.7 billion to $230.7 billion as imports of goods increased $2.8 billion to $193.4 billion and imports of services decreased $0.1 billion to $37.3 billion, while total exports were $0.4 billion lower than August’s at $188.9 billion, as exports of goods decreased $0.2 billion to $132.1 billion and exports of services decreased $0.2 billion to $56.8 billion, resulting in a September excess of imports over exports of $41.8 billion…our FRED bar graph below shows how exports in blue and imports in red influence the change in the balance of trade, which is shown in brown; each group of three bars represents one month’s of trade data over the past two years, with positive changes above the ‘0’ line and negative changes below it; when exports (blue) increase in a given month, they add to the trade balance change in brown; conversely, when exports decrease, they subtract from the brown trade balance bar; the action of imports on the balance is just the reverse; when imports increase in a given month, they subtract from the brown trade balance for the month, but when imports decrease, the balance of trade rises as a result…

FRED Graph

BEA Guesses Wrong on Goods Trade Deficit

as you may recall, last week we pointed out that the BEA only had two months of data from several data sets when estimating 3rd quarter GDP, and that in lieu of data, they made several assumptions which were included with the technical note accompanying the release; however, their data isn’t directly comparable to this trade data, as all national accounts amounts from the BEA are expressed monthly at an annual rate, whereas this Census data is just monthly; so we’ll express the difference in the two as a percentage change…the BEA assumed that exports of goods would increase 1.4% in September, when in fact they decreased by 0.15%; similarly, when figuring GDP, the BEA assumed that September imports of goods increased 1.3%, and as we’ve just seen, they actually increased 1.5%…so, in sum, BEA’s assumption was that the seasonally adjusted trade deficit in goods would increase by less than 1% in September, whereas the goods deficit actually increased by $3.0 billion from August to $61.3 billion in September, a month over month increase of 4.9%…Robert Oak at the Economic Populist works out the change in GDP from there so we don’t have to; he finds that the larger than expected September trade deficit will lower third quarter GDP by 0.3 percentage points…

Our Auto and Oil Imports Rise as we Export less Gold and Fuel Oil in September

the end use categories of imports that saw major seasonally adjusted increases in September were industrial supplies and materials, which increased $901 million to $57,346 million, automotive vehicles, parts, and engines, which saw imports rise $887 million to $27,131 million, and capital goods, where our September imports of $47,100 million were $830 million more than August…among our imports of industrial supplies, crude oil imports increased $956 million to $23,741 million, natural gas imports increased $179 million, and imports of non-monetary gold decreased $304 million; among our imports of capital goods, imports of civilian aircraft rose $413 million, imports of computer accessories rose $346 million, imports of semiconductors rose $336 million, while imports of computers fell $250 million month over month; in addition, imports of consumer goods rose $624 million to $44,214 million as a $915 million increase in cell phones and a $342 million increase in pharmaceutical imports was partially offset by decreases of $177 million in cotton goods, $164 million in gem diamonds and $143 million in textiles not made of cotton or wool…meanwhile imports of foods feeds and beverages fell $44 million to $9,595 million in September and imports of other goods not included in an end use category fell $373 million to $5,957 million..

the major month over month changes in our exports of goods by end use category in September included a $1,442 million increase in exports of foods, feeds, and beverages to $11,597 million, almost all of which could be accounted for by a $1,118 million increase in our exports of soybeans; also a 1,264 million decrease in our exports of Industrial supplies and materials, which fell to $41,436 million, mostly due to the decreases of $671 million in exports of non-monetary gold and $592 million decrease in exports of fuel oil…September also saw a small $7 million decrease in exports of automotive vehicles, parts, and engines to $13,125 million and a $97 million decrease in our exports of non-automotive capital goods to $44,723 million, as a $211 million decrease in civilian aircraft exports and a $132 million decrease in exports of excavating machinery was largely offset by a $302 million increase in exports of industrial engines and a $166 million increase in semiconductor exports…there was also a $202 million decrease in exports of consumer goods to $15,417 million, as September exports of gem diamonds fell $507 million and jewelry exports fell $139 million, which was partially offset by a $487 million increase in exports of pharmaceuticals, and an additional decrease of $218 million in exports of other goods not included in an other end use category…

since the monthly data tends to be noisy, wherein what’s exported or imported increases one month might decrease the next, it might pay to look at trade over a longer time horizon to get a better picture of what’s going on…over the first nine months of 2013, our major exports have included $113,775 million in automotive vehicles, parts, and engines, up $3,838 million from our automotive exports of the similar period last year, $46,982 million in fuel oil, an increase of $2,854 over our fuel oil exports last year, $43,402 million worth of exports of other petroleum products, up $1,809 million from last year, $40,822 million in civilian aircraft exports, an increase of $7,550 million from last year, $35,940 in Industrial machines not otherwise listed, up $933 million over 2012′s export pace, $31,733 million worth of semiconductors, an increase of $78 million over our semiconductor exports from last year, $36,443 million in pharmaceuticals, a $1,021 million increase over last year’s level, $30,050 million in electric apparatuses, a $1,409 million increase over last year’s export pace, $29,688 million of telecommunications equipment, an increase of $1,032 million over the the first nine months of 2012, and $28,055 million of exports of non-monetary gold, $643 million over last year’s export pace..

our major imports by dollar value over the first three quarters of this year included automotive vehicles, parts, and engines at $229,518 million, which was $6,820 million more than we imported over the same months last year, crude oil at $205,307 million, down $34,214 million from the first three quarters of 2012, fuel oil at 34,482, up $969 million over last year’s imports, other petroleum products, at $36,691 million, down $934 million from 2012, pharmaceuticals at $62,613 million, down $3,976 from our drug imports of the first nine months of last year, cell phones and related goods, at $66,953 million, a $7,907 million increase from 2012′s import level, computers at $47,775 million, a $852 million decrease from last year, computer accessories at $41,603 million, down also by $1,027 million from last year’s pace, telecommunications equipment at $41,152 million, an increase of $1,655 million from last years telecom imports, electric apparatuses at $34,032 million, $1,898 million higher than last year; cotton apparel and other goods at 36,297 million, a year over year increase of $837 million, and Industrial machines not otherwise listed at $35,015 million, a decrease of $1,591 million from the value of such machines we imported last year…

the other noteworthy element of this September trade report was how much of it was as a result of our trade imbalance with China; in data that is not seasonally adjusted, the commerce department reported that our bilateral trade deficit with China reached a record $30.5 billion in September, up from $29.9 billion in August and by itself accounting for 49% of the total goods deficit on a Census accounting basis…other large bilateral trade deficits for September were at $8.0 billion with the European Union, which fell from $9.8 billion in August, $6.1 billion with Germany, $5.9 billion with OPEC, $5.5 billion with Japan, $5.3 billion with Mexico #.2 billion with Canada, $3.2 billion with Saudi Arabia, $2.1 billion with Korea, $1.8 billion with Ireland $1.7 billion with India, and 1.3 billion with Venezuela…we managed small bilateral trade surpluses with Hong Kong at $3.2 billion, with Australia at $1.5 billion, with Singapore at $1.3 billion, and with Brazil at $1.0 billion…

the graph below, which comes from Bill McBride, tracks our total trade deficit in blue for each month since January 1998, and then breaks our trade deficit into an oil component in black and an “everything else” component in red…note the graphs are shown as a negative amount from the top “$0” bar, so the further down the graph, the greater the deficit is…clearly, roughly half our trade deficit has been in oil since the onset of the recession (the pale blue vertical bar), but as that has gradually improved, so has our overall deficit in blue; the price of crude oil averaged $102.00 a barrel in August, up from $100.26 in August, and up from $98.90 a year ago, so although we’ve generally been importing less oil, it’s been costing us more..

TradeDeficitSept2013

September Wholesale Inventories Raise 3rd Qtr GDP Estimates

the other release this week that may have an impact on revisions to GDP was on September Wholesale Trade Sales and Inventories (pdf), which showed that seasonally adjusted sales of merchant wholesalers were up 0.6% (+/-0.5%) from August at $430.5 billion, a level 3.9% (+/-3.2%) above a year earlier, and that total inventories of merchant wholesalers were at $506.3 billion at the end of September, up 0.4% (+/-0.4%)* from August’s revised level and 2.2% (+/-4.7%)* above the inventories of September 2012; this isn’t a widely watched report and considering the large margin of error it wouldn’t be important except for the fact that this data was unknown to the BEA when they released the Advance Estimate of GDP last week…the technical note on 3rd quarter GDP indicates the BEA assumed that wholesale and retail inventories would decrease by $7.6 billion in September; so with the apparent actual increase of slightly more that $2.0 billion in September wholesale inventories.it appears their guess underestimated by a bit; however, note that the BEA’s estimate includes retail inventories and we dont yet have the data for that; when August retail inventories were reported on Oct 29th, they were at a seasonally adjusted 508.4 billion, down 4.5% from July, quite a one month drop, so it’s reasonable to expect that retail inventories, which are of the same magnitude of wholesale inventories, would have rebounded and also be up in September, making BEA assumptions well off the mark…but we dont know that yet, and we wont until retail inventories are released on November 20th…but that didn’t stop economists from raising their estimate on revised 3rd quarter GDP; J.P. Morgan Chase and Barclays economists raised their estimates to 3.1%, and Macroeconomic Advisers is now forecasting a revision to a 3.3% growth rate…from here it looks like they’re out on a limb with insufficient data…

3rd Quarter Sees Largest Jump in Household Debt Since Q1 2008

another release of this past week that we want to take a look at is the 3rd Quarter Report on Household Debt and Credit (pdf) from the NY Fed which showed that total household debt, including real estate debt, increased by $127 billion to $11.28 trillion in the 3rd quarter, which was 1.1% higher than the debt level in the second quarter and the largest increase seen since the first quarter of 2008…much of the increase was in non-housing related debt, which increased 2.7%, with consumers adding $31 billion to their auto loan balances, $4 billion to their credit card balances, and $33 billion more in student loan debt, which hit a record $1.027 trillion…in addition, mortgage balances as taken from consumer credit reports increased by $56 billion to $7.90 trillion, a 0.7% increase over the second quarter, while balances on home equity lines of credit (HELOCs) fell by $5 billion to $535 billion, a 0.9% decrease from last quarter…

delinquency rates on most loans. except for student debt and HELOCs, continued to improve in the 3rd quarter, with $831 billion, or 7.4% of total debt outstanding in some stage of delinquency as of September 30, down from a delinquency rate of 7.6% at the end of the third quarter; $600 billion of that was considered seriously delinquent, meaning the debt payments were more than 90 days late or “severely derogatory”, which is the category of debt that includes new foreclosures, repossessions, and debts that have been turned over to 3rd parties for collection….the rate that current mortgages are transitioning into delinquency is at 1.6% of mortgage debt outstanding, which the NY fed considers a pre-crisis rate; however, 22.7% of those mortgages that were 30 to 90 days late on their housepayments transitioned to seriously delinquent (more than 90 days late) in the 3rd quarter, a slightly higher rate than in the second, and the cure rate, or those mortgages that were between 30 and 90 days delinquent that caught up on their payments, also also worsened somewhat, dropping to 25.7% for the 3rd quarter…so you see that this report is not only interesting in that the trend towards consumer deleveraging, or lowering of outstanding debts, reversed itself in the 3rd quarter, but that this report includes yet another take on the same kind of data on home mortgages that we looked at from the MBA National Delinquency Survey and the LPS Mortgage Monitor last week; ie, those that are delinquent, or behind on their payments, and those that are seriously delinquent or in foreclosure…the data used in this report is unique, in that it comes from the NY Fed’s own consumer credit panel and the credit reporting agency Equifax, so we can expect differences in the same manner that the household survey differs from the establishment survey in the jobs report…for instance, the NY Fed says about 168,000 individuals had a new foreclosure notation added to their credit reports over the quarter; but LPS data from the lenders shows new foreclosure starts over 100,000 each month, with 108,953 foreclosure starts in September alone…

  much like the LPS mortgage monitor, this 31 page pdf report from the NY Fed is almost entirely graphs; it only has one page of text covering the data and a glossary of terms used at the end of the report, so we’ll take a look at a few of the graphs and discuss what they imply…the first bar graph below shows the components of total household debt for each quarter since the beginning of 2003, with each bar on the graph representing a quarter of a year, and showing a color coded representation of the amount in dollars of each type of debt that was outstanding in that given 3 month timeframe…in each bar, orange represents the amount of mortgage debt that was outstanding at the end of that quarter, violet is the home equity loans outstanding, green are auto loans, blue is credit card debt, red are student loans, and grey is ‘other’ debt outstanding in the quarter represented by any given bar…although mortgage debt is trending down, we should note that this report and its graphics does not distinguish between mortgage debt that has been paid off and mortgage debt that has been extinguished through a foreclosure or a short sale… we can also see here the jump in debt this recent quarter on the left, driven, as we mentioned by increases in all types of debt except revolving home equity loans…

Fed 3rd quarter total debt composition

what the next bar graph represents is a little less intuitive; again, each bar represents a quarter of a year starting from 2003; and within each bar, the percentage of debt outstanding that was paid up current at the end of the quarter is shown in green, and then, for the those loans that are late in being repaid, the percentage in each delinquency category by days or condition are coded by color, with each bar adding up to 100% of the debt outstanding in that quarter, irregardless of the amount; so the light green is the percentage debt that was 30 days late in that quarter, the blue is the percentage debt that was 60 days delinquent in that quarter, the yellow is the percentage debt that was 90 days late, the orange is the percentage debt that was 120 days late, and the red is the percentage of debt that was severely derogatory, including foreclosures, at the end of each quarter…

Fed 3rd quarter by delinquency status

the next graph shows the percentage of each type of loan that was 90 days or more delinquent over the same time frame; we can see how seriously delinquent mortgage debt shown in yellow peaked in 2009, followed by even worse seriously delinquent rates for credit card debt in blue…and while the percentage of seriously late debt for those categories and auto loans in green has been trending down since 2010, the percentage of seriously delinquent student loans shown in red continues to rise, and is now at 11.8% of all student debt outstanding

Fed 3rd quarter 90 dat delinquency by type

the next graph is another bar graph; each bar has a color coded representation of the amount of newly delinquent loans by type as they first became delinquent in each quarter, over the same time frame and with the same color coding as the first graph we looked at; we can see a pretty clear peak with over $400 billion of newly delinquent debt in the last quarter of 2008; we can also see that there’s a trend for student debt, or the red in each bar, to become larger as time goes on, and also clearly noticeable is the $200 billion jump in new delinquent debt in this most recent quarter…

NY Fed New delinquent by type

the next graph is formatted just like the last, except it shows new seriously delinquent debt outstanding by type of borrowing; unsurprisingly, the newly serious debt, which are loans more than 90 days late, peaked in the 1st quarter of 2009, 3 months after the peak in new 30 day delinquencies…we can also see a small increase in this serious debt in the most recent bar as the amount of seriously delinquent student loans in red expanded…

NY Fed 3rd qtr serious delinquent debt by type

the remaining graphics that follow are taken from after page 19 in the report, which is a breakdown of outstanding debt by state; each chart in this section graphically shows debt statistics for the ten largest states by population, plus Arizona and Nevada, apparently because those two were at the center of the mortgage crisis…the color coding for those 12 states is consistent throughout…

  the first state graph below shows the historical track of the average amount of debt outstanding for each person with a credit report in each of these 12 states over the period from 2003 to the present…the real estate related peak is obvious, as is the fact that California, with its higher priced real estate, has the highest debt per capita…the barely readable footnote says that with this quarter, there was a change in credit reporting standards that increased the headcount and hence reduced the per capita debt outstanding for each state, and that, absent that revision, per capita debt would have increased…

NY Fed 3rd qtr debt per capita by state

the next bar graph shows the composition of the total debt by type in thousands of dollars for the average person with a credit report in each state, with a separate bar for each state wtih types of debt color coded as before.. while it’s not a surprise that the percentage composition for most states is close to the national averages, although we note a larger than average proportion of student debt in red in Michigan and New York, and not that other than mortgages, the largest proportion of debt outstanding for Texans is for auto loans, where they’ve got almost twice as much as several other states…

NY Fed 3rd qtr composition of debt by state

finally, the last state graph shows the percentages of mortgage debt that has been more than 90 days delinquent in each state over the course of the mortgage crisis; you see that both Nevada and Florida still show a seriously delinquency rate of greater than 12%, ie, that would mean that roughly one in eight homeowners in those two states are more than 90 days behind on their mortgage…this is greater than the seriously delinquent percentages we saw in the MBA delinquency survey and the LPS Mortgage Monitor last week, especially in the case of Nevada; the LPS state delinquency table shows mortgage delinquencies, which includes even 30 day payment shortfalls, at 7.3% for Nevada, with an additional 3.9% of Nevada mortgages in foreclosure…and while mortgage delinquencies in New York and New Jersey have been rising according to both reports as shown below, their total levels according to LPS are at 6.8% and 7.5% respectively…but as we see below, data from the New York Fed and Equifax indicate that more than 9% of homeowners in those two states are more than 90 days behind on their mortgages…

NY Fed 90 day mortgage by state

October Industrial Production Falls on Return to Normal Weather

another important release of this past week was the October report on Industrial Production and Capacity Utilization from the Fed, which showed seasonally adjusted industrial production decreased 0.1% in October, after rising a revised 0.7% in September, but the internals were better than the headline decline looks…if you recall the September industrial production report, which we just looked at just two weeks ago, we noted that the gain was almost entirely driven by a 4.4% jump in utility output, which in turn was driven by the 6th warmest September on record, boosting the reported seasonally adjusted utility output to a greater than normal figure…but the manufacturing component of September’s industrial production, which is driven by demand associated with business and consumer confidence, just barely rose 0.1%…in this October report, the apparent fall in the overall index was due to a 1.1% pullback in utility output, as October weather reverted to more normal patterns, and a 1.6% decrease in mining output, which is another volatile sector…but the manufacturing index, which is the real indicator or economic activity in this report, rose a weak but respectable 0.3%…and the overall index is still at 100.0, which means the only real change this month in overall production was due to the upward revision of September data..

while the headlines about industrial production are all focused on those three industry groups (manufacturing, mining and utilities), the detailed activity gleaned from this release comes from the report on industrial production by market group; within final products and nonindustrial supplies, which accounts for 53.46% of industrial output and which saw a 0.1% increase in October, production of consumer goods fell 0.1% for the month as production of durable goods fell 0.2% and production of non-durables was flat…among durable goods, automotive products production fell 1.0% after rising 1.5% in September and 4.5% in August, while production of home electronics rose 0.5% and output of appliances, furniture and carpeting increased by 1.0%…among non durable goods, production of foods and tobacco rose 0.3%, output of clothing increased by 0.1%, production of chemical products fell 0.5%, production of paper products rose 0.1% and energy output was off 0.3%…year over year, production of consumer durables rose 8.8% on the strength of an 11.2% increase in automotive products production, while October production of consumer non-durables was 0.7% higher than a year earlier on the strength of an 8.3% increase in clothing production..

production of business equipment rose 0.2% in October after a 1.1% increase in September; of that, production of transit equipment fell 0.1% after a 2.3% increase in September, while output of information processing equipment rose 0.2% and output of industrial and other equipment rose 0.3%…on a year over year basis, production of business equipment was up 5.1%, with transit equipment output up 5.2%, information processing equipment output up 5.7%, and production of industrial and other equipment up 4.9%…in addition, production of defense and space equipment rose 0.5% for the month and 3.3% from October a year ago, output of construction supplies increased 0.3% for the month, and 6.6% year over year, while output of business supplies increased 0.2% in October and posted a 3.0% from a year earlier..

the production of of materials to be processed further in the industrial sector, which accounts for 46.54% of the industrial production index, saw output fall 0.4% in October, as production of non-energy materials rose 0.4% and energy inputs fell 1.5%…production of inputs into durable goods rose 0.3% as production of parts for consumer goods fell 1.1%, equipment parts rose 0.6%, and output of other parts was also up 0.6% for the month; production of inputs into nondurable goods rose 0.4% as output of paper materials rose 1.0%, output of textile materials rose 0.7% and output of chemicals for use in non-durables was up 0.5%…on a year over year basis, production of of materials to be processed further rose 3.1%, as production of non-energy materials rose 2.1% with durable inputs increasing 4.2% and non-durable inputs up 1.0% while output of energy materials rose 3.5%..

capacity utilization for total industry, which is expressed as the percentage of our plant and equipment that was in use during the month, fell 0.2% from 78.3% in September to 78.1% in October; capacity utilization in October 2012 was at 77.0%…76.2% of our manufacturing capacity was in use during the month, an increase of 0.1% over September and up from 74.9% a year earlier; manufacturers of durable goods were operating at 76.6% of capacity, unchanged from September, with manufactures of furniture seeing the largest increase in utilization as their operating rate rose from 74.8% to 76.0%, while the operating rate for motor vehicle production fell from 77.0% to 75.9%…meanwhile, the operating rate for manufacturers of non-durable goods rose from 76.9% in September to 77.1% in October with printers seeing the largest increase, from 67.1% to 68.5%…in addition, the operating rate for mining equipment slipped from 90.5% in September to 88.7% in October, and capacity utilization for utilities fell from 79.2% to 78.3% as a return to more normal weather reduced seasonally adjusted output…

our FRED graph below shows the track of the industrial production index in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of 2005; recall that all these indexes were benchmarked to 2007 = 100.0, so that the overall index in black at 100.0 is at exactly the same level it was at six years ago…as of October, the manufacturing index lagged at 96.0, the utilities index was at 101.5, and the mining index had risen to 120.6, mostly to the explosion of gas and oil rigs over most of the country…also shown below in pink is the track of capacity utilization for total industry since 2005; note that it’s a percentage, rather than an index number like the other metrics tracked on the same graph…

FRED Graph

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)