Below is the summary from this week’s Monday Economic Report:
Before we could fully process the outcome of last week’s election, policymakers and financial markets began to focus immediately on the looming fiscal cliff. The Dow Jones Industrial Average fell over three percent between its closes on Tuesday and Friday, and the Congressional Budget Office reiterated its forecast that the United States would fall back into a recession if lawmakers fail to avert the fiscal cliff. For their part, both President Obama and Speaker of the House John Boehner (R-OH) spoke of a possible compromise post-election, with Speaker Boehner open to “new revenues” stemming from tax reform and the President eager to work with Congress while also restating his desire for a “balanced approach” to reducing the deficit. Manufacturers will be watching these developments closely, as the uncertain business and political environment has dampened economic growth of late. For example, the number of manufacturing job postings in September fell for the fourth straight month.
Economic challenges are not limited to the United States, with European woes once again coming into focus. September’s industrial production figures released last week were lower in Spain (down 7.0 percent), France (down 2.7 percent), Germany (down 1.8 percent), the United Kingdom (down 1.8 percent) and Italy (down 1.5 percent). Other data also indicate that economic activity in the Eurozone deteriorated, with higher unemployment, a contracting Purchasing Managers’ Index (PMI) and lower retail sales. Eurozone GDP figures will be released on Thursday and are expected to be down roughly 0.3 percent.
Despite significant headwinds in the United States and Europe, manufacturers increased exports in September. Goods exports rose to $134.0 billion—an all-time high—and the overall trade deficit narrowed to $41.5 billion. The gain stemmed from both petroleum and nonpetroleum exports, with many regions around the world increasing trade. (Exports to Europe were flat for the month.) Manufactured goods exports rose 6.1 percent year-over-year. Recent progress on the trade front can be attributed to some improvements (even among definite weaknesses) globally. For instance, industrial production in China edged higher (up 9.6 percent year-over-year), its highest level since May. This follows better (but still contracting) PMI data out earlier in the month.
New U.S. industrial production data on Friday should show modest growth for the second month in a row. In addition, regional manufacturing surveys from the New York and Philadelphia Federal Reserve Banks will be released on Thursday. Both improved in October, although the Empire State survey still contracted. It will be interesting to see if the data reflect continued gains. Other highlights for this week include consumer and producer prices, retail sales and small business optimism.
Chad Moutray is the chief economist at the National Association of Manufacturers.
Latest posts by Chad Moutray (see all)
- New Durable Goods Orders Rebounded, up 3.1% in February and 6.9% Year-over-Year - March 23, 2018
- Kansas City Fed: Manufacturing Outlook Remained Very Optimistic in March, but with Accelerating Costs - March 22, 2018
- IHS Markit: U.S. Manufacturing Activity Improved in March to a 3-Year High - March 22, 2018