Here is the summary for this week’s Monday Economic Report:
This week, we will receive a number of reports on the health of the manufacturing sector in the United States. The highlight of these will come on Wednesday with the release of industrial production data for December. It is expected to show only modest growth at best, as manufacturers pulled back due to uncertainties related to the fiscal cliff and slowing sales. If the production numbers mirror the Purchasing Managers’ Index data for December, they might also show some progress for the month, with some of that related to Hurricane Sandy’s aftermath. These trends will likely also show up in regional manufacturing surveys from the New York and Philadelphia Federal Reserve Banks.
All data released last week tended to echo what we have observed for some time. While there have been improvements in some data, businesses and consumers ended 2012 with a high degree of uncertainty. The Manufacturers Alliance for Productivity and Innovation’s (MAPI) Manufacturers Survey found that the pace of expansion for the manufacturing community slowed somewhat, particularly with declining export sales. Even with this finding, respondents were cautiously optimistic about 2013. Meanwhile, small business owners remain worried about weaker sales and earnings, with taxes as their top problem—a nod to the fiscal cliff and the fact that they will face higher marginal tax rates.
On the trade front, goods imports rose substantially in November, widening the overall trade deficit. Growth in exports was slower, with numerous headwinds internationally impacting foreign sales. Lower petroleum costs, however, helped to improve November’s trade balance. At the same time, November’s employment growth was sluggish for the manufacturing sector, with job postings off slightly and hiring levels down. The larger non-farm economy was mostly unchanged in terms of hiring and job openings, even as the United States added a modest amount of workers for the month.
Other data points this week include information on consumer and producer prices, consumer sentiment, housing starts, retail sales and state employment. Market watchers will also closely follow the Federal Reserve’s Beige Book due out Wednesday, which summarizes the nation’s regional economies. It is likely to continue to show modest economic growth despite softness both globally and in some sectors, including manufacturing.
Chad Moutray is the chief economist, National Association of Manufacturers.