2Q2019 Gross Domestic Product: Third Estimate

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In its third estimate of 2Q2019 gross domestic product (GDP), the Bureau of Economic Analysis (BEA) nudged the growth rate of the U.S. economy to a seasonally adjusted and annualized rate (SAAR) of +2.01% (+2.0% expected), down 0.03 percentage point (PP) from the second estimate (“2Qv2”) and -1.09PP from 1Q2019.

As in 2Qv1&2, two of the four groupings of GDP components -- personal consumption expenditures (PCE) and government consumption expenditures (GCE) -- contributed to 2Q growth; private domestic investment (PDI) and net exports (NetX) detracted from growth.

Just as the modification to the percentage-change headline was primarily statistical noise, so too were changes to most of the underlying components. Nearly all of the positive changes in nominal-dollar terms were limited to (in billions of dollars): transportation services ($7.4), receipts by nonprofit institutions ($2.6), state and local expenditures ($2.4), recreation services ($2.4), health care ($1.9) and exports ($1.5). These were largely offset by negative changes to other services (-$9.3), nonresidential structures (-$3.0), financial services and insurance (-$1.6), housing and utilities (-$1.5), and other nondurable goods (-$1.3). In a $21 trillion economy, such changes are barely more than rounding error. 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

August 2019 Residential Sales, Inventory and Prices

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Sales of new single-family houses in August 2019 were at a seasonally adjusted annual rate (SAAR) of 713,000 units (645,000 expected). This is 7.1% (±20.3%)* above the revised July rate of 666,000 (originally 635,000) and 18.0% (±19.9%)* above the August 2018 SAAR of 604,000 units; the not-seasonally adjusted year-over-year comparison (shown in the table above) was +21.3%. For longer-term perspectives, not-seasonally adjusted sales were 48.7% below the “housing bubble” peak but 9.0% above the long-term, pre-2000 average.

The median sales price of new houses sold in August rose to $328,400 (+$23,000 or 7.5% MoM); meanwhile, the average sales price jumped to a new record $404,200 (+$31,500 or +8.5%). Starter homes (defined here as those priced below $200,000) comprised 10.5% of the total sold, down fractionally from the year-earlier 10.6%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 1.8% of those sold in August, down from 2.1% a year earlier.

* 90% confidence interval includes zero. The Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero. 

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As mentioned in our post about housing permits, starts and completions in August, single-unit completions increased by 34,000 units (+3.7%). Because the rise in sales (+47,000 units; 7.1%) outpaced that of completions, inventory for sale shrank in both absolute (-4,000 units) and months-of-inventory (-0.4 month) terms. 

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Existing home sales advanced in August (+70,000 units), to a SAAR of 5.49 million units (5.375 million expected). Inventory of existing homes for sale contracted in both absolute (-40,000 units) and months-of-inventory (-0.1 month) terms. The median price of previously owned homes sold in August declined to $278,200 (-$2,200 or 0.8% MoM). Because new-home sales rose by a proportionally greater amount, the share of total sales comprised of new homes bumped up to 11.5%. 

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Housing affordability improved (+7.3 percentage points) as the median price of existing homes for sale in July retreated by $4,500 (-1.6%; +4.5 YoY), to $284,000. Concurrently, Standard & Poor’s reported that the U.S. National Index in the S&P Case-Shiller CoreLogic Home Price indices rose at a not-seasonally adjusted monthly change of +0.4% (+3.2% YoY) -- the slowest rate of annual appreciation since September 2012.

“Year-over-year home prices continued to gain, but at ever more modest rates,” said Philip Murphy, Managing Director and Global Head of Index Governance at S&P Dow Jones Indices. “Charlotte surpassed Tampa to join the top three cities, and Seattle may be turning around from its recent negative streak of YOY price changes, improving from -1.3% in June to -0.06% in July.

“Overall, leadership remains in the southwest (Phoenix and Las Vegas) and southeast (Charlotte and Tampa). Other pockets of relative strength include Minneapolis, which increased its YOY gain to 4.2%, and Detroit, which is closely behind at 4.1% YOY. The 10-City and 20-City Composites both experienced lower YOY price gains than last month, declining to 1.6% and 2.0% respectively. However, the U.S. National Home Price NSA Index remained steady with a YOY price gain of 3.2%, the same as prior month. Home price gains remained positive in low single digits in most cities, and other fundamentals indicate renewed housing demand. According to the National Association of Realtors, the YOY change in existing home sales was positive in July for the first time in a number of months, and housing supply tightened since peaking in June.” 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

August 2019 Residential Permits, Starts and Completions

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Builders started construction of privately-owned housing units in August at a seasonally adjusted annual rate (SAAR) of 1,364,000 units (1.250 million expected). This is 12.3% (±10.2%) above the revised July estimate of 1,215,000 (originally 1.191 million units) and 6.6% (±11.6%)* above the August 2018 SAAR of 1,279,000 units; the not-seasonally adjusted YoY change (shown in the table above) was +6.4%.

Single-family housing starts were at a rate of 919,000; this is 4.4% (±10.3%)* above the revised July figure of 880,000 (+2.1% YoY). Multi-family starts: 445,000 units (+32.8% MoM; +17.0% YoY).

* 90% confidence interval (CI) is not statistically different from zero. The Census Bureau does not publish CIs for the entire multi-unit category. 

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Completions were at a SAAR of 1,294,000 units. This is 2.4% (±11.5%)* above the revised July estimate of 1,264,000 (originally 1.250 million units) and 5.0% (±11.2%)* above the August 2018 SAAR of 1,232,000 units; the NSA comparison: +5.9% YoY.

Single-family completions were at a rate of 945,000; this is 3.7% (±10.5%)* above the revised July rate of 911,000 (+1.4% YoY). Multi-family completions: 349,000 units (-1.1% MoM; +18.2% YoY). 

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Total permits amounted to a SAAR of 1,419,000 units (1.300 million expected). This is 7.7% (±1.2%) above the revised July rate of 1,317,000 (originally 1.336 million units) and 12.0% (±1.6%) above the August 2018 SAAR of 1,267,000 units; the NSA comparison: +7.4% YoY.

Single-family permits were at a SAAR of 866,000; this is 4.5% (±0.8%) above the revised July figure of 829,000 (-0.6% YoY). Multi-family: 553,000 (+13.3% MoM; +23.5% YoY). 

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Builder confidence in the market for newly-built single-family homes rose one point to 68 in September from an upwardly revised August reading of 67, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Sentiment levels have held in the mid- to upper 60s since May and September’s reading matches the highest level since last October.

“Low interest rates and solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor,” said NAHB Chairman Greg Ugalde.

“Solid household formations and attractive mortgage rates are contributing to a positive builder outlook,” said NAHB Chief Economist Robert Dietz. “However, builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China. NAHB’s Home Building Geography Index indicates that the slowdown in the manufacturing sector is holding back home construction in some parts of the nation, although there is growth in rural and exurban areas.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

August 2019 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) rose 0.6% in August (+0.1% expected) after declining 0.1% in July. Manufacturing production increased 0.5%, more than reversing its decrease in July. Factory output has increased 0.2% per month over the past four months after having decreased 0.5% per month during the first four months of the year. In August, the indexes for utilities and mining moved up 0.6% and 1.4%, respectively. At 109.9% of its 2012 average, total IP was 0.4% higher in August than it was a year earlier. 

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Industry Groups

Manufacturing output rose 0.5% in August (NAICS manufacturing: +0.5% MoM; -0.4% YoY), as the indexes for durables and for nondurables increased while the index for other manufacturing (publishing and logging) edged down. Production rose for most major categories within durable manufacturing. The largest gains were recorded by machinery, primary metals, and nonmetallic mineral products (wood products: +0.7%); the only sizable decline was recorded by motor vehicles and parts. The gain of 0.5% for nondurables reflected strength in plastics and rubber products and in chemicals; the other major nondurable goods industries registered either declines or very small increases (Paper products: -0.7%).

Mining output increased 1.4% in August after having fallen a similar amount in July; output in July had been suppressed by a cutback in oil extraction in the Gulf of Mexico due to Hurricane Barry. The output of utilities increased 0.6%, with gains in both electric and natural gas utilities. 

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Capacity utilization (CU) for the industrial sector increased 0.4 percentage point (PP) in August to 77.9%, a rate that is 1.9PP below its long-run (1972–2018) average.

Manufacturing CU increased 0.3PP to 75.7% in August, a rate that is 2.6PP below its long-run average (NAICS manufacturing: +0.4%, to 76.2%). The operating rates for both durable and nondurable manufacturing increased 0.3PP (wood products: +0.4%; paper products: -0.7%). The utilization rate for mining moved up to 90.5%, a bit lower than its average in the three months before Hurricane Barry but 3.4PP higher than its long-run average. The rate for utilities increased 0.3PP but remained well below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+2.2 % YoY) to 141.1% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.4% YoY) to 139.5%. Wood products: +0.3% (+4.1% YoY) to 167.0%; paper products: 0.0% (-0.5 % YoY) to 109.8%.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

July 2019 International Trade (Softwood Lumber)

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Softwood lumber exports increased (5 MMBF or +4.7%) in July; imports fell (144 MMBF or -11.3%). Exports were 15 MMBF (-11.4%) below year-earlier levels; imports were 237 MMBF (-17.3%) lower. As a result, the year-over-year (YoY) net export deficit was 221 MMBF (-18.0%) smaller. Also, the average net export deficit for the 12 months ending July 2019 was 1.8% smaller than the average of the same months a year earlier (the “YoY MA(12) % Chng” series shown in the graph above). 

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North America (44.1%; of which Canada: 23.1%; Mexico: 20.9%) and Asia (27.8%; especially China: 9.1%; and Japan: 6.7%) were the primary destinations for U.S. softwood lumber exports; the Caribbean ranked third with a 23.0% share. Year-to-date (YTD) exports to China were -64.1% relative to the same months in 2018. Meanwhile, Canada was the source of most (90.4%) of softwood lumber imports into the United States. Imports from Canada were 4.0% lower YTD than the same months in 2018. Overall, YTD exports were down 23.6% compared to 2018; imports: -3.9%. 

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U.S. softwood lumber export activity through the West Coast customs region represented the largest proportion (35.5% of the U.S. total), followed by the Gulf (20.2%) and Eastern (26.6%) regions. Seattle (21.4% of the U.S. total) maintained the lead over Mobile (20.6%) as the single most-active district. At the same time, Great Lakes customs region handled 63.4% of softwood lumber imports -- most notably the Duluth, MN district (23.5%) -- coming into the United States. 

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Southern yellow pine comprised 27.6% of all softwood lumber exports, Douglas-fir (14.5%) and treated lumber (12.8%) were also significant. Southern pine exports were down 40.5% YTD relative to 2018, while treated: -23.8%; Doug-fir: -6.3%.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

August 2019 Consumer and Producer Price Indices (incl. Forest Products)

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Consumer Price Index

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1% in August (+0.1% expected). Increases in the indexes for shelter and medical care were the major factors in the seasonally adjusted all items monthly increase, outweighing a decline in the energy index. The energy index fell 1.9% in August as the gasoline index declined 3.5%. The food index was unchanged for the third month in a row.

The index for all items less food and energy rose 0.3% in August, the same increase as in June and July. Along with the indexes for medical care and shelter, the indexes for recreation, used cars and trucks, and airline fares were among the indexes that increased in August. The indexes for new vehicles and household furnishings and operations declined over the month.

The all items index increased 1.7% for the 12 months ending August; the 12-month increase has remained in the range of 1.5 to 2.0% since the period ending December 2018. The index for all items less food and energy rose 2.4% over the last 12 months, its largest 12-month increase since July 2018. The food index rose 1.7% over the last year while the energy index declined 4.4%. 

Producer Price Index

The Producer Price Index for final demand (PPI-FD) rose 0.1% in August (+0.1% expected). Final demand prices moved up 0.2% in July and 0.1% in June. In August, the advance in final demand prices is attributable to a 0.3% increase in the index for final demand services. In contrast, prices for final demand goods fell 0.5%.

On an unadjusted basis, the final demand index rose 1.8% for the 12 months ended in August. The index for final demand less foods, energy, and trade services rose 0.4% in August following a 0.1% decline in July. For the 12 months ended in August, prices for final demand less foods, energy, and trade services moved up 1.9%.

Final Demand

Final demand services: The index for final demand services advanced 0.3% in August after edging down 0.1% in July. Almost 80% of the broad-based increase can be traced to prices for final demand services less trade, transportation, and warehousing, which climbed 0.5%. Margins for final demand trade services rose 0.2%, and prices for final demand transportation and warehousing services advanced 0.3%. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: A major factor in the increase in prices for final demand services was the index for guestroom rental, which moved up 6.4%. The indexes for fuels and lubricants retailing; apparel, footwear, and accessories retailing; chemicals and allied products wholesaling; gaming receipts (partial); and insurance also advanced. Conversely, margins for machinery and vehicle wholesaling declined 4.2%. The indexes for health, beauty, and optical goods retailing and for support activities for oil and gas operations also decreased.

Final demand goods: The index for final demand goods moved down 0.5% in August, the largest decrease since falling 0.6% in January. Over 80% of the August decline can be attributed to prices for final demand energy, which dropped 2.5%. The index for final demand foods moved down 0.6%, while prices for final demand goods less foods and energy were unchanged.

Product detail: Almost two-thirds of the August decline in the index for final demand goods can be traced to prices for gasoline, which dropped 6.6%. The indexes for fresh and dry vegetables, diesel fuel, corn, home heating oil, and ethanol also moved lower. In contrast, prices for meats advanced 3.0%. The indexes for iron and steel scrap and for residential electric power also increased. 

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The not-seasonally adjusted price indexes we track were almost all on a MoM basis; all were lower YoY. 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

August 2019 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm payroll employment rising by 130,000 jobs in August (+158,000 expected). Also, combined June and July employment gains were revised down by 20,000 (June: -15,000; July: -5,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) was unchanged at 3.7% as expansion of the working-age labor force (+571,000) roughly matched growth in the number of employed persons (+590,000). 

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Observations from the employment reports include:

* The establishment (+130,000 jobs) and household survey results (+590,000 employed) were dramatically different. The seasonal adjustment to the establishment number was the biggest identifiable factor contributing to the disparity with the household result: Had average (since 2009) August CES (business birth/death model) and seasonal adjustments been used, job gains might have been bumped to +214,000.

* Manufacturing added 3,000 jobs in August. That result seems to run counter to the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which contracted in August. Wood Products employment was unchanged (ISM increased); Paper and Paper Products: -100 (ISM increased); Construction: +14,000 (ISM increased). 

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* The number of employment-age persons not in the labor force (NILF) fell (-364,000) to 95.5 million. This metric seems to have leveled off since the latter half of 2018. Meanwhile, the employment-population ratio (EPR) inched up to 60.9% -- its highest level since December 2008; roughly, then, for every five people being added to the working-age population, three are employed. 

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* With absolute growth in the labor force nearly 2.8 times that of the civilian population, the labor force participation rate rose to 63.2% -- matching the Jan/Feb 2019 peak. Average hourly earnings of all private employees increased by $0.11, to $28.11, resulting in a 3.2% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages also rose by $0.11, to $23.59 (+3.5% YoY). Because the average workweek for all employees on private nonfarm payrolls expanded by 0.1 hour (to 34.4 hours), average weekly earnings increased by $6.58, to $966.98 (+3.0% YoY). With the consumer price index running at an annual rate of 1.8% in July, workers are maintaining purchasing power according to official metrics. 

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* Full-time jobs jumped by 360,000, to a new record. Those employed part time for economic reasons (PTER) -- e.g., slack work or business conditions, or could find only part-time work -- also bounced by 397,000. Those working part time for non-economic reasons rose by 260,000 while multiple-job holders edged lower by 16,000. 

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For a “sanity test” of the employment numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in August dropped by $17.4 billion, to $193.5 billion (-8.3% MoM, but +1.2% YoY and +3.4% YTD). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending August was 5.0% above the year-earlier average -- well off the peak of +13.8% set back in September 2013.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

August 2019 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil retraced most of July’s gain, falling by $2.55 (-4.4%), to $54.81 per barrel in August. The decrease occurred within the context of a noticeably stronger U.S. dollar, and continued declines in accumulated oil stocks (August average: 434 million barrels). The volume of petroleum products supplied in June was not yet published when this post was being written. 

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Publication of Peak Oil Review remained on hiatus as of the time of this post. 

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Selected highlights from the 3 September 2019 issue of OilPrice.com’s Intelligence Report include:

OPEC production rose in August for first time in 2019. OPEC production rose by 200,000 bpd in August, the first collective increase since the OPEC+ cuts took effect at the start of the year. Gains came from Saudi Arabia, Nigeria and Iraq.

U.S. oil production slows. The latest EIA data shows monthly U.S. oil production falling to 12.082 mb/d in June, a slight decrease from the month before. The figures show a decline in some states, while only tepid growth in Texas. The data offers more evidence of a slowdown in production growth from the shale patch.

U.S. truck makers report lower orders. U.S. truck manufacturers report sharply lower orders, another sign of an economic slowdown. Trade tariffs and a slowdown in manufacturing is reducing demand for freight. Rates for freight have declined 20 percent since June 2018, according to The Wall Street Journal.

Hedge funds cut positions in oil. Hedge funds and other money managers have become a bit more pessimistic on crude oil, cutting their net-length in the futures market last week for the third time in the last four weeks.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

August 2019 ISM and Markit Surveys

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The Institute for Supply Management’s (ISM) monthly sentiment survey showed that in August, U.S. manufacturing contracted for the first time since August 2016. The PMI registered 49.1%, down 2.1 percentage points (PP) from the July reading. (50% is the breakpoint between contraction and expansion.) ISM’s manufacturing survey represents under 10% of U.S. employment and about 20% of the overall economy. Significant declines were seen in the indexes for new orders (-3.6PP), employment (-4.3PP) and exports (-4.8PP). 

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The pace of growth in the non-manufacturing sector -- which accounts for 80% of the economy and 90% of employment -- accelerated (+2.7PP, to 56.5%). The increase was driven primarily by jumps in the business activity (+8.4PP) and new orders (+6.2PP) indexes. 

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Of the industries we track, only Paper Products contracted. Respondent comments included the following:

Construction -- "Lower mortgage rates have not had a great effect on new residential construction sales. Tariffs continue to apply upward cost pressures to current supply chains."

Real Estate, Rental & Leasing -- "Construction markets remain busy. Projects that were delayed are trying to get back on track."

Relevant commodities:

Priced higher -- None.

Priced lower -- Corrugated boxes, natural gas, crude oil and pulp.

Prices mixed -- Fuel (diesel and gasoline).

In short supply -- Construction subcontractors; and labor (general, construction and temporary).

Findings of IHS Markit’s August manufacturing survey aligned with those of ISM, but diverged significantly in the services survey.

Manufacturing -- Manufacturing PMI lowest for almost a decade as export decline intensifies

Key findings:

* PMI at 50.3 in August (49.9 flash, 50.4 in July), lowest since September 2009
* Rates of output and new order growth remain subdued
* New export orders fall at quickest pace for 10 years

Services -- Slowest increase in new business since March 2016

Key findings:

* New business growth eases to marginal rate
* Input prices fall for the first time in the series history
* Business confidence slides to fresh series low

Commentary by Chris Williamson, Markit’s chief business economist:

Manufacturing -- "The August PMI indicates that U.S. manufacturers are enduring a torrid summer, with the main survey gauge down to its lowest since the depths of the financial crisis in 2009. Output and order book indices are both among the lowest seen for a decade, indicating that manufacturing is likely to have again acted as a significant drag on the economy in the third quarter, dampening GDP growth.

“At current levels, the survey indicates that manufacturing production is falling at an annualized rate of approximately 3%.

“Deteriorating exports are the key to the downturn, with new orders from foreign markets dropping at the fastest rate since 2009. Many companies blame slower global economic growth for weakened order books, but also point the finger at rising trade war tensions and tariffs.

“Hiring has stalled as companies worry about the outlook: optimism about the year ahead is at its lowest since comparable data were first available in 2012. Similarly, price pressures are close to a three-year low, as crumbling demand has removed firms’ pricing power.”

Services -- “U.S. businesses reported one of the toughest months since the global financial crisis in August, with growth of output, order books and hiring all slowing amid steep falls in both export and business confidence.

“Only on two occasions since the global financial crisis have the U.S. PMI surveys recorded a weaker monthly expansion, and these were months in which business was hit by the government shutdown and bad weather in 2013 and 2016 respectively. This time, trade wars and falling exports appear to be the main drivers of weakness, exacerbating fears of a broader economic slowdown both at home and globally.

“At current levels, the August PMIs are indicating annualized GDP growth of 1.0%, putting the economy on course for growth of just below 1.5% in the third quarter. Such weak readings hint at downside risks to current third quarter growth projections, which generally point to an expansion of just over 2%.

“A major factor behind the deterioration was the spreading of the manufacturing downturn to the service sector, via weakened household and business confidence. Jobs growth is also increasingly being affected by worries regarding the outlook. Overall jobs growth in August was the weakest since early-2012, commensurate with non-farm payrolls rising at a monthly rate of under 100,000.”

Commenting on the J.P.Morgan Global Composite PMI, Olya Borichevska, from Global Economic Research at J.P.Morgan, said: “The August PMI points to growth at the slowest pace over the past three years. Signs of further potential weakness are also gathering, with growth of new order inflows losing impetus, job creation slowing and business confidence sliding to a fresh series-record low. With market conditions tight and global trade tensions heightened, a sustained revival in global GDP growth still looks to be some way off in the distance.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

July 2019 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

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According to the U.S. Census Bureau, the value of manufactured-goods shipments in July decreased $0.9 billion or 0.2% to $504.0 billion. Durable goods shipments decreased $2.9 billion or 1.1% to $253.9 billion led by transportation equipment. Meanwhile, nondurable goods shipments increased $2.0 billion or 0.8% to $250.1 billion, led by petroleum and coal products. Shipments of wood products dropped by 0.6% while paper was unchanged. 

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Inventories increased $1.2 billion or 0.2% to $696.5 billion. The inventories-to-shipments ratio was 1.38, unchanged from June. Inventories of durable goods increased $1.4 billion or 0.3% to $427.1 billion, led by transportation equipment. Nondurable goods inventories decreased $0.2 billion or 0.1% to $269.4 billion, led by chemical products. Inventories of wood products fell by 0.4%; paper: -0.6%. 

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New orders increased $6.9 billion or 1.4% to $500.3 billion. Excluding transportation, new orders rose by 0.3% (+0.8% YoY). Durable goods orders increased $5.0 billion or 2.0% to $250.2 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- nudged up 0.2% (+0.6% YoY). New orders for nondurable goods increased $2.0 billion or 0.8% to $250.1 billion.

As can be seen in the graph above, real (inflation-adjusted) new orders were essentially flat between early 2012 and mid-2014, recouping on average less than 70% of the losses incurred since the beginning of the Great Recession. The recovery in real new orders is back to just 53% of the ground given up in the Great Recession. 

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Unfilled durable-goods orders increased $0.6 billion or virtually unchanged to $1,161.5 billion, led by fabricated metal products. The unfilled orders-to-shipments ratio was 6.67, up from 6.55 in June. Real unfilled orders, which had been a good litmus test for sector growth, show a less positive picture; in real terms, unfilled orders in June 2014 were back to 97% of their December 2008 peak. Real unfilled orders then jumped to 102% of the prior peak in July 2014, thanks to the largest-ever batch of aircraft orders. Since then, however, real unfilled orders have been going sideways-to-down.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

August 2019 Currency Exchange Rates

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In August the monthly average value of the U.S. dollar (USD) appreciated versus Canada’s “loonie” (+1.3%) and the euro (+0.7%), but depreciated against the yen (-1.9%). On a trade-weighted index basis, the USD gained 2.0% against a basket of 26 currencies. 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.