3Q2019 Gross Domestic Product: First (“Advance”) Estimate

Click image for larger version

The Bureau of Economic Analysis (BEA) pegged its advance (first) estimate of 3Q2019 U.S. gross domestic product (GDP) at a seasonally adjusted and annualized rate (SAAR) of +1.93% (1.7% expected), down 0.08 percentage point (PP) from 2Q2019’s +2.01%.

On a year-over-year (YoY) basis, which should eliminate any residual seasonality distortions present in quarter-over-quarter (QoQ) comparisons, GDP in 3Q2019 was 2.03% higher than in 3Q2018; that growth rate was slightly slower (-0.25PP) than 2Q2019’s +2.28% relative to 2Q2018.

Two groupings of GDP components -- personal consumption expenditures (PCE) and government consumption expenditures (GCE) -- contributed to 3Q growth. Private domestic investment (PDI) and net exports (NetX) detracted from growth.

Besides consumer and government spending, positive contributions included housing investment and exports; however, business investment and inventory investment decreased. Imports also increased, which explains why net trade subtracted from GDP for the second consecutive quarter.

The increase in consumer spending reflected increases in both goods (notably recreational goods and vehicles, food and beverages, and other nondurables) and in services (led by health care and housing and utilities). Overall, personal consumption rose 1.9% in 3Q, after rising 3.0% during the prior quarter. Coincidentally, personal consumption was 100% of 3Q GDP growth; all other GDP components netted to 0%.

The BEA’s growth in real final sales of domestic product, which excludes the effect of inventories, dropped by nearly one-third, to +1.98%, down 0.94PP from 2Q2019. 

Click image for larger version

“Although the headline number did not change significantly from quarter to quarter,” wrote Consumer Metric Institute’s Rick Davis, “there are items of concern in this new report.” Those items include the following:

* The headline number was rescued by exports and inventory growth -- two of the BEA's most volatile line items -- which do not reflect domestic consumption.

* The previously 3+% growth in consumer spending for goods and services weakened materially.

* The softening consumer spending is going into increased household savings -- ahead of the 4Q holiday spending cycle.

* Inventory changes went from a strong drawdown to a nearly neutral reading, indicating that although retailers are no longer clearing stock, they remain cautious about the highly anticipated holiday spending.

* And the BEA's own "bottom line" measurement of economic growth ("Real Final Sales") weakened by nearly a full percent (-0.94pp).

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.

September 2019 Residential Sales, Inventory and Prices

Click image for larger view 

Click image for larger view

Sales of new single-family houses in September 2019 were at a seasonally adjusted annual rate (SAAR) of 701,000 units (699,000 expected). This is 0.7% (±16.1%)* below the revised August rate of 706,000 (originally 713,000), but 15.5% (±20.2%)* above the September 2018 SAAR of 607,000 units; the not-seasonally adjusted (NSA) year-over-year comparison (shown in the table above) was +17.4%. For longer-term perspectives, NSA sales were 49.5% below the “housing bubble” peak but 3.3% above the long-term, pre-2000 average.

The median sales price of new houses sold in September plummeted to $299,400 (-$25,800 or 7.9% MoM); meanwhile, the average sales price also dropped to $362,700 (-$32,100 or -8.1%). Starter homes (defined here as those priced below $200,000) comprised 14.8% of the total sold, down substantially from the year-earlier 8.7%; prior to the Great Recession starter homes represented as much as 61% of total new-home sales. Homes priced below $150,000 made up 3.7% of those sold in September, up from 2.2% 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. 

Click image for larger view

As mentioned in our post about housing permits, starts and completions in September, single-unit completions decreased by 80,000 units (-8.6%). Because the tick down in sales (-5,000 units; 0.7%) was smaller than that of completions, inventory for sale shrank in absolute terms (-2,000 units) but was stable in months-of-inventory terms. 

Click image for larger view

Existing home sales retreated in September (-120,000 units or 2.2%), to a SAAR of 5.38 million units (5.45 million expected). Inventory of existing homes for sale was unchanged in absolute terms but expanded slightly (+0.1 month) in months-of-inventory terms. Because new-home sales fell by a proportionally smaller amount, the share of total sales comprised of new homes bumped up to 11.5%. The median price of previously owned homes sold in September declined to $272,100 (-$6,800 or 2.4% MoM). 

Click image for larger view

Housing affordability improved (+5.1 percentage points) as the median price of existing homes for sale in August retreated by $2,900 (-1.0%; +4.7 YoY), to $280,700. 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 +0.2% (+3.2% YoY) -- the slowest pre-2019 rate of annual appreciation since September 2012.

“The U.S. National Home Price NSA Index trend remained intact with a year-over-year price change of 3.2%” said Philip Murphy, Managing Director and Global Head of Index Governance at S&P Dow Jones Indices. “However, a shift in regional leadership may be underway beneath the headline national index.

“Phoenix saw an increase in its YOY price change to 6.3% and retained its leading position. However, Las Vegas dropped from number two to number eight among the cities of the 20-City Composite, falling from a 4.7% YOY change in July to only 3.3% in August. Meanwhile, the Southeast region included three of the top four cities. Charlotte, Tampa, and Atlanta all recorded solid YOY performance with price changes of 4.5%, 4.3%, and 4.0%, respectively. In the Northwest, Seattle’s YOY change turned positive (0.7%) after three consecutive months of negative YOY price changes. The 10-City Composite YOY price change declined slightly from July to 1.5%, while the 20-City Composite YOY price change remained steady at 2.0%. San Francisco was the only city to record a negative YOY price change (-0.1%).” 

Click image for larger view

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.

September 2019 Residential Permits, Starts and Completions

Click image for larger view 

Click image for larger view

Builders started construction of privately-owned housing units in September at a seasonally adjusted annual rate (SAAR) of 1,256,000 units (1.300 million expected). This is 9.4% (±9.4%)* below the revised August estimate of 1,386,000 (originally 1.364 million units), but 1.6% (±11.6%)* above the September 2018 SAAR of 1,236,000 units; the not-seasonally adjusted YoY change (shown in the table above) was +2.9%.

Single-family housing starts were at a SAAR of 918,000; this is 0.3% (±9.3%)* above the revised August figure of 915,000 (+7.6% YoY). Multi-family starts: 338,000 units (-28.2% MoM; -7.2% YoY).

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

Click image for larger view 

Click image for larger view

Total completions were at a SAAR of 1,139,000 units. This is 9.7% (±9.2%) below the revised August estimate of 1,262,000 (originally 1.294 million units) and 1.0% (±9.9%)* below the September 2018 SAAR of 1,150,000 units; the NSA comparison: -3.8% YoY.

Single-family completions were at a rate of 852,000; this is 8.6% (±9.3%)* below the revised August rate of 932,000 (-0.6% YoY). Multi-family completions: 287,000 units (-13.0% MoM; -12.1% YoY). 

Click image for larger view 

Click image for larger view

Total permits amounted to a SAAR of 1,387,000 units (1.335 million expected). This is 2.7% (±1.3%) below the revised August rate of 1,425,000 (originally 1.419 million units), but is 7.7% (±2.4%) above the September 2018 SAAR of 1,288,000 units; the NSA comparison: +13.8% YoY.

Single-family permits were at a SAAR of 882,000; this is 0.8% (±0.8%)* above the revised August figure of 875,000 (+8.4% YoY). Multi-family: 505,000 (-8.2% MoM; +23.8% YoY). 

Click image for larger view 

Click image for larger view

Builder confidence in the market for newly-built single-family homes rose three points to 71 in October, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Sentiment levels are at their highest point since February 2018.

“The housing rebound that began in the spring continues, supported by low mortgage rates, solid job growth and a reduction in new home inventory,” said NAHB Chairman Greg Ugalde.

“The second half of 2019 has seen steady gains in single-family construction, and this is mirrored by the gradual uptick in builder sentiment over the past few months,” said NAHB Chief Economist Robert Dietz. “However, builders continue to remain cautious due to ongoing supply side constraints and concerns about a slowing economy.”

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.

September 2019 Industrial Production, Capacity Utilization and Capacity

Click image for larger version

Total industrial production (IP) fell back 0.4% (-0.2% expected) in September after advancing 0.8% in August. For 3Q, IP rose at an annual rate of 1.2% following declines of about 2% in both 1&2Q. Manufacturing production decreased 0.5% in September, with output reduced by a strike at a major manufacturer of motor vehicles. Excluding motor vehicles and parts, the overall index and the manufacturing index each moved down 0.2%. Mining production fell 1.3%, while utilities output rose 1.4%. At 109.5% of its 2012 average, total industrial production was 0.1% lower in September than it was a year earlier. 

Click image for larger version 

Click image for larger version

Industry Groups

Manufacturing output fell 0.5% in September but rose at an annual rate of 1.1% in 3Q (NAICS manufacturing: -0.5% MoM; -0.8% YoY). In September, the motor vehicle industry strike contributed to a drop of 0.7% for durables; the index for nondurables declined 0.2%, while the index for other manufacturing (publishing and logging) rose 0.5%. Excluding the decrease of 4.2% for motor vehicles and parts, the output of durables edged down 0.1%, with decreases of nearly 1% or more in primary metals; machinery; and electrical equipment, appliances, and components. Gains of nearly 1% or more were recorded by computer and electronic products, by aerospace and miscellaneous transportation equipment, and by furniture and related products; wood products: +0.5%. Among nondurable goods industries, apparel and leather posted the largest gain (2.3%), while plastics and rubber products posted the largest loss (1.2%); paper products: -0.4%.

Mining output moved down 1.3% in September; reductions in crude oil extraction and well drilling contributed to the decline. The index for mining fell at an annual rate of 4.4% in 3Q, its first quarterly decrease in three years. The output of utilities moved up 1.4% in September, as unseasonably warm weather boosted demand for electricity. 

Click image for larger version

Capacity utilization (CU) for the industrial sector decreased 0.4 percentage point (PP) in September to 77.5%, a rate that is 2.3PP below its long-run (1972–2018) average.

Manufacturing CU decreased 0.4PP to 75.3% in September, a rate that is 3.0PP below its long-run average (NAICS manufacturing: -0.6%, to 75.7%). The operating rate for durables dropped 0.7PP, while the rate for nondurables decreased 0.3PP (wood products: +0.1%; paper products: -0.4%). The utilization rate for mining fell to 88.9% yet was still almost 2PP higher than its long-run average. The rate for utilities rose 0.9PP but remained well below its long-run average. 

Click image for larger version

Capacity at the all-industries level nudged up 0.2% (+2.2 % YoY) to 141.4% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.4% YoY) to 139.7%. Wood products: +0.3% (+4.1% YoY) to 167.5%; paper products: 0.0% (-0.4 % YoY) to 109.7%.

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.

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

Click image for larger version

Consumer Price Index

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in September (+0.1% expected) after rising 0.1% in August. Increases in the indexes for shelter and food were offset by declines in the indexes for energy and used cars and trucks to result in the seasonally adjusted all items index being flat. The energy index fell 1.4% as the gasoline index declined 2.4%. The food index increased 0.1% in September after being unchanged in each of the prior 3 months.  

The index for all items less food and energy rose 0.1% in September after increasing 0.3% in each of the last 3 months. Along with the shelter index (+0.3%), the indexes for medical care (+0.4%), household furnishings and supplies (+0.3%), and motor vehicle insurance (+0.3%) all rose in September. The indexes for used cars and trucks (-1.6%), apparel (-0.4%), new vehicles (-0.1%), and communication (-1.2%) all declined.  

The all items index increased 1.7% for the 12 months ending September, the same increase as for the 12 months ending August. The index for all items less food and energy rose 2.4% over the last 12 months, also the same increase as the period ending August. The food index increased 1.8% over the last year, while the energy index decreased 4.8%; medical care rose by 4.4%. 

Producer Price Index

The Producer Price Index for final demand (PPI-FD) decreased 0.3% in September (+0.1% expected). Final demand prices rose 0.1% in August and 0.2% in July. In September, the index for final demand services decreased 0.2%, and prices for final demand goods dropped 0.4%. The index for final demand less foods, energy, and trade services was unchanged in September after rising 0.4% in August.

On an unadjusted basis, the final demand index advanced 1.4% for the 12 months ended in September. Prices for final demand less foods, energy, and trade services advanced 1.7%.

Final Demand

Final demand services: The index for final demand services fell 0.2% in September following a 0.3% increase in August. Leading the decline, the index for final demand trade services decreased 1.0%. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand transportation and warehousing services also moved down 1.0%. In contrast, the index for final demand services less trade, transportation, and warehousing climbed 0.3%.

Product detail: Nearly half of the September decline in prices for final demand services can be traced to the index for machinery and vehicle wholesaling, which fell 2.7%. The indexes for automotive fuels and lubricants retailing; apparel, jewelry, footwear, and accessories retailing; airline passenger services; gaming receipts (partial); and professional and commercial equipment wholesaling also moved lower. Conversely, prices for hospital outpatient care rose 1.1%. The indexes for bundled wired telecommunications access services and for food and alcohol wholesaling also advanced.

Final demand goods: The index for final demand goods decreased 0.4% in September after a 0.5% drop in August. Most of the September decline is attributable to prices for final demand energy, which fell 2.5%. The index for final demand goods less foods and energy edged down 0.1%. In contrast, prices for final demand foods moved up 0.3%.

Product detail: Three-fourths of the September decrease in the index for final demand goods can be traced to prices for gasoline, which fell 7.2%. The indexes for electric power, iron and steel scrap, basic organic chemicals, fresh and dry vegetables, and light motor trucks also moved lower. Conversely, prices for meats rose 1.9%. The indexes for liquefied petroleum gas and pharmaceutical preparations also increased. 

Click image for larger version

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

Click image for larger version

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 International Trade (Softwood Lumber)

Click image for larger view 

Click image for larger view

Softwood lumber exports decreased (7 MMBF or -6.3%) in August; imports rose (88 MMBF or +7.8%). Exports were 34 MMBF (-23.9%) below year-earlier levels; imports were 128 MMBF (-9.5%) lower. As a result, the year-over-year (YoY) net export deficit was 94 MMBF (-7.8%) smaller. Also, the average net export deficit for the 12 months ending August 2019 was 3.9% smaller than the average of the same months a year earlier (the “YoY MA(12) % Chng” series shown in the graph above). 

Click image for larger view

North America (42.8%; of which Canada: 21.8%; Mexico: 20.9%) and Asia (30.4%; especially China: 8.4%; and Japan: 7.9%) were the primary destinations for U.S. softwood lumber exports; the Caribbean ranked third with a 19.9% share. Year-to-date (YTD) exports to China were -62.9% relative to the same months in 2018. Meanwhile, Canada was the source of most (91.1%) of softwood lumber imports into the United States. Imports from Canada were 4.8% lower YTD than the same months in 2018. Overall, YTD exports were down 23.7% compared to 2018; imports: -4.6%. 

Click image for larger view 

Click image for larger view

U.S. softwood lumber export activity through the West Coast customs region represented the largest proportion (34.9% of the U.S. total), followed by the Gulf (30.2%) and Eastern (26.7%) regions. Seattle (20.7% of the U.S. total) maintained the lead over Mobile (19.9%) as the single most-active district. At the same time, Great Lakes customs region handled 64.6% of softwood lumber imports -- most notably the Duluth, MN district (22.4%) -- coming into the United States. 

Click image for larger view 

Click image for larger view

Southern yellow pine comprised 26.1% of all softwood lumber exports, Douglas-fir (15.7%) and treated lumber (11.7%) were also significant. Southern pine exports were down 38.9% YTD relative to 2018, while treated: -24.8%; Doug-fir: -7.2%.

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.

September 2019 Employment Report

Click image for larger view

The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm payroll employment rising by 136,000 jobs in September (+145,000 expected). Also, combined July and August employment gains were revised up by 45,000 (July: +7,000; August: 38,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) fell to 3.5% as growth in the number of employed persons (+391,000) was more than three times the expansion of the labor force (+117,000). 

Click image for larger view

Observations from the employment reports include:

* The establishment (+136,000 jobs) and household survey results (+391,000 employed) were again misaligned. Had average (since 2009) September CES (business birth/death model) and seasonal adjustments been used, job gains might have been a truly abysmal -30,000. Interestingly, the seasonal adjustment factor for the month of September has been trending downward from 2009’s peak of 600,000. Hence, using the average seasonal adjustment of the prior decade likely overstates the BLS’s tweaking; also, the seasonal adjustment used in this report is nearly identical to September 2018’s factor.

* Manufacturing lost 2,000 jobs in September. That result is reasonably consistent with the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which contracted at a faster pace in September. Wood Products employment added 1,200 jobs (ISM decreased); Paper and Paper Products: -600 (ISM decreased); Construction: +7,000 (ISM unchanged). 

Click image for larger view

* The number of employment-age persons not in the labor force (NILF) was little changed (+89,000) at 95.6 million. This metric has leveled off since the latter half of 2018. Meanwhile, the employment-population ratio (EPR) inched up to 61.0% -- its highest level since December 2008; roughly, then, for every five people being added to the working-age population, three are employed. 

Click image for larger view

* With growth in the labor force roughly half that of the working-age civilian population, the labor force participation rate was unchanged at 63.2%. Average hourly earnings of all private employees dropped a penny, to $28.09, resulting in a 2.9% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose by $0.04, to $23.65 (+3.5% YoY). Because the average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours, average weekly earnings decreased by $0.34, to $966.30 (+2.6% YoY). With the consumer price index running at an annual rate of 1.7% in August, workers are maintaining purchasing power according to official metrics. 

Click image for larger view

* Full-time jobs jumped by 305,000, to a new record. Those employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- slipped by -31,000. Those working part time for non-economic reasons dropped by 124,000 while multiple-job holders edged lower by 16,000. 

Click image for larger view

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 September rose by $8.6 billion, to $202.1 billion (+4.4% MoM, +13.6% YoY and +4.4% 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 September was 8.1% 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.

September 2019 ISM and Markit Surveys

Click image for larger version

The Institute for Supply Management’s (ISM) monthly sentiment survey showed that in September, U.S. manufacturing contracted further. The PMI registered 47.8%, down 1.3 percentage points (PP) from the August 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. Notable declines occurred in the indexes for inventories, exports and production; indexes rose (but remained below 50) for input prices and imports. 

Click image for larger version

The pace of growth in the non-manufacturing sector -- which accounts for 80% of the economy and 90% of employment -- decelerated (-3.8PP, to 52.6%), its lowest reading since August 2016. Drivers behind the drop were widespread, but offset to some extent by increases in the order backlog and exports indexes. 

Click image for larger version

Of the industries we track, only Construction and Ag & Forestry expanded. Respondent comments included the following:

Construction -- "We are very busy right now [and] expect to be so for the next 12 months. We are still very shorthanded with qualified labor."

Ag & Forestry -- "Demand has been variable -- up one month, down the next. I think customers are watching our input costs and buying ahead on the dips, to the extent that contracts allow."

Relevant commodities:

Priced higher -- Construction subcontractors and labor, freight and natural gas.

Priced lower -- Corrugated boxes and pulp.

Prices mixed -- Fuel (diesel and gasoline).

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

Findings of IHS Markit’s September surveys were mixed relative to their ISM counterparts, but the overall conclusions were the same -- conditions in both manufacturing and services are tepid at best.

Manufacturing -- September PMI rises to five-month high as output growth strengthens

Key findings:

* Stronger, albeit only slight improvement in operating conditions
* Faster increases in output and new business
* Job creation quickens to marginal rate

Services -- New business growth slides to lowest in survey history

Key findings:

* Expansion in new orders eases to marginal rate
* Employment declines for first time since February 2010
* Input prices reduced at sharpest pace in series history

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

Manufacturing -- "News of the PMI hitting a five-month high brings a sigh of relief, but manufacturing is not out of the woods yet. The September improvement fails to prevent U.S. goods producers from having endured their worst quarter for a decade. Given these PMI numbers, the manufacturing recession appears to have extended into its third quarter.

“It’s also far from clear that the trend will improve in the fourth quarter. Inflows of new work remain worryingly subdued, to the extent that current production growth is having to be supported by firms increasingly eating into order book backlogs. Business sentiment about the year ahead is also stuck at gloomy levels.

“The current situation contrasts markedly with earlier in the year, when companies were struggling to keep up with demand. Now, spare capacity appears to be developing, which is causing firms to curb their hiring compared to earlier in 2019 and become more cautious about costs and spending.“

Services -- “A disappointing service sector PMI follows news of lackluster manufacturing and means the past two months have seen one of the weakest back-to-back expansions of business activity since 2009, sending a signal of slower GDP growth in the third quarter. The surveys are consistent with the economy growing at a 1.5% annualized rate in the third quarter, with forward-looking indicators suggesting further momentum could be lost in the fourth quarter. In particular, inflows of new business have almost stalled, with September seeing the smallest increase since 2009, and business expectations about the year ahead remain stuck at one of the gloomiest levels since at least 2012.

“In this environment, companies are taking an increasingly cost-conscious approach to payrolls, with September consequently seeing surveyed firms report a net drop in headcounts for the first time since 2010. This translates into non-farm payroll growth trending below 100,000.

“Price pressures have also abated in line with the weak demand picture, suggesting official inflation gauges could likewise moderate in coming months.”

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 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

Click image for larger view 

Click image for larger view

According to the U.S. Census Bureau, the value of manufactured-goods shipments in August decreased $0.7 billion or 0.1% to $503.0 billion. Durable goods shipments increased $0.1 billion or 0.1% to $253.9 billion led by machinery. Meanwhile, nondurable goods shipments decreased $0.8 billion or 0.3% to $249.0 billion, led by petroleum and coal products. Shipments of wood products jumped by 1.6% while paper rose 0.2%. 

Click image for larger view

Inventories decreased $0.3 billion or virtually unchanged to $695.9 billion. The inventories-to-shipments ratio was 1.38, unchanged from July. Inventories of durable goods increased $1.1 billion or 0.2% to $428.3 billion, led by transportation equipment. Nondurable goods inventories decreased $1.4 billion or 0.5% to $267.6 billion, led by petroleum and coal products. Inventories of wood products and paper both expanded by 0.4%. 

Click image for larger view

New orders decreased $0.4 billion or 0.1% to $499.8 billion. Excluding transportation, new orders were essentially unchanged (-1.5% YoY). Durable goods orders increased $0.4 billion or 0.2% to $250.7 billion, led by transportation equipment. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending – fell by 0.4% (-1.8% YoY). New orders for nondurable goods decreased $0.8 billion or 0.3% to $249.0 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 52% of the ground given up in the Great Recession. 

Click image for larger view

Unfilled durable-goods orders increased $1.1 billion or 0.1% to $1,162.9 billion, led by fabricated metal products. The unfilled orders-to-shipments ratio was 6.66, down from 6.67 in July. 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 trending 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.

September 2019 Monthly Average Crude Oil Price

Click image for larger view

The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil edged up by $2.14 (+3.9%), to $56.95 per barrel in September. The increase occurred within the context of a record-strong U.S. dollar (broad trade-weighted index basis), the lagged impacts of a 138,000 barrel-per-day (BPD) rise in the amount of petroleum products supplied during July (to 20.7 million BPD), and a levelling-off in accumulated oil stocks (September average: 419 million barrels). 

Click image for larger view 

Click image for larger view

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.

September 2019 Currency Exchange Rates

Click image for larger view

In September the monthly average value of the U.S. dollar (USD) depreciated versus Canada’s “loonie” (-0.2%), but appreciated against the euro (+1.1%) and yen (+1.3%). On a trade-weighted index basis, the USD gained 0.3% against a basket of 26 currencies. 

Click image for larger view

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.