With fewer economic data points released last week, attention turned to the situation in Greece. Even with new austerity measures and debt restructuring plans, worries abound about the possibility of default and, more importantly, the larger implications for the entire Eurozone. Equity markets around the world reflect these anxieties about the European sovereign debt crisis. Manufacturers are closely following these developments, with nearly half of them in a recent survey suggesting that Europe’s challenges have impacted their sales. Indeed, manufactured goods exports have slowed recently in large part because of weakness in the European market.
Economic uncertainty also worries the American public. Despite improvements in recent employment and production numbers, the latest consumer confidence figures from the University of Michigan fell slightly on weakened perceptions about the current economic environment. A similar falloff in sentiment was observed in the most recent consumer survey from the Conference Board. Nonetheless, consumers are clearly more optimistic today than last fall, and they continue to spend, albeit more selectively than some might prefer. The challenge is that much of this spending has been with borrowers’ dollars. This was confirmed last week with the Federal Reserve’s report of a surge in additional indebtedness.
On a more positive note, manufacturers have stepped up hiring in the past couple of months. Job openings in December were up for both the manufacturing sector and the economy as a whole. There were 35,000 net new manufacturing hires in the month of December, an improvement from November’s 19,000. (Note that labor turnover data are reported with a lag, so the strong employment gains of January are not included in this analysis.) While employment levels remain well below where they should be, these numbers are obviously welcome news.
This week, we will learn more about recent manufacturing activity, with new industrial production figures and surveys from the Federal Reserve Banks in New York and Philadelphia. These reports are expected to show continued growth among manufacturers. In addition, the latest housing data are predicted to show additional residential construction in January, building off recent incremental gains. Finally, we will obtain the latest data on retail sales, inflation and small business sentiment.
Chad Moutray is Chief Economist, National Association of Manufacturers.
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