Below is the summary from this week’s Monday Economic Report:
The Conference Board’s Leading Economic Index, which forecasts where the economy is headed in the months ahead, rose 0.6 percent last month. As with many indicators released during the past few weeks, this one suggests some improvement in the current environment, albeit with persistent weaknesses still present in the marketplace. The largest driver of growth for the Leading Economic Index was the large jump in housing permits, which soared from an annualized 801,000 to 894,000 units from August to September. Housing starts also rose to an unexpected high of 872,000 new residential units, a sign that this all-important sector continues to move in the right direction.
Manufacturing production also improved in September; however, the 0.2 percent gain was not enough to fully offset August’s 0.9 percent loss. Capacity utilization remained unchanged and well below the levels seen earlier this year. Data from the regional Federal Reserve Banks in New York and Philadelphia tend to support this softness. While respondents to the Philly Fed survey were more optimistic on overall business conditions, the underlying components reflected a contraction for new orders, shipments and employment. The same was true in the Empire State survey. Both surveys found manufacturers in their respective regions cautiously optimistic for increasing activity levels six months from now, but with less certainty than in prior months.
On the consumer front, Americans remain more upbeat than the economic headwinds facing the economy might suggest, as seen in recent data on consumer confidence and personal spending. Last week, retail sales reports showed strong growth of 1.1 percent in September, building on impressive gains in retail sales in both July and August. A 4.5 percent increase in electronics spending boosted the September figure, with the new iPhone 5 almost single-handedly moving the market. Other major sectors showed strength as well. Modest inflationary pressures have helped lift consumer spirits. Even with higher energy prices, core consumer prices have risen just 2 percent over the past 12 months, indicating modest pricing pressures.
With inflation in-check for now, the Federal Reserve Board is expected to continue the expansionary policies announced at its September 13 meeting. No major changes are anticipated this week from the Federal Open Market Committee (FOMC), which meets October 23–24. The other big news this week will come on Friday with the announcement of GDP figures for the third quarter. I estimate this should be around 1.8 percent growth in real GDP, an improvement from the 1.25 percent growth in the second quarter but still disappointing overall. Other releases this week include regional manufacturing surveys from Kansas City and Richmond, Flash Purchasing Managers’ Index (PMI) data from Markit regarding the United States and Europe, and durable goods sales.
Chad Moutray is chief economist, National Association of Manufacturers.
Latest posts by Chad Moutray (see all)
- Housing Starts Disappoint Again in September, Partly on Hurricane Impacts - October 18, 2017
- NAHB: Builders Remain Optimistic about Growth in October - October 17, 2017
- Manufacturing Production Edged Higher in September but Still Exhibits Hurricane-Related Softness - October 17, 2017