Here is the summary for this week’s Monday Economic Report:
As we move into September, manufacturers remain mostly upbeat about increased demand and production for the rest of the year, even as they weigh possible downward risks that might curtail such positive sentiments. With that in mind, the fact that real GDP was revised higher from the original estimate of 1.7 percent to 2.5 percent was welcome news. Much of that improvement was due to better export figures, as we saw in June’s trade data. With export growth frustratingly slow so far in 2013, this was an encouraging sign for the third quarter. We will get new trade numbers for July on Wednesday.
Even with the upward revision, the U.S. economy grew at a rather paltry 1.8 percent in the first half of the year. Assuming growth in the second half picks up, as most manufacturers predict, real GDP growth in 2013 will still rise only modestly this year, probably slightly greater than 2.0 percent. Business leaders yearn for policies like those laid out in the NAM’s Growth Agenda that will boost growth beyond the moderate pace that we have become accustomed to over the past few years.
From a manufacturing perspective, the most recent reports have been mixed. New durable goods orders plunged in July. This was largely on reduced aircraft orders, but there were broader weaknesses as well. Nonetheless, new durable goods sales have risen 3.4 percent year-to-date, hopefully suggesting that July’s decline was just a blip. Likewise, the Midwest Manufacturing Index (MMI) was lower in July, mostly on decreased output in the automotive and machinery sectors. However, this was not the only reading on Midwestern production. The Chicago Business Barometer edged somewhat higher in its August Purchasing Managers’ Index, giving some hope that the MMI softness might have been short-lived. Meanwhile, manufacturers in the Dallas and Richmond Federal Reserve regions reported expanding activity and a cautiously optimistic outlook ahead, even as the Dallas Federal Reserve found some easing in sentiment for the month.
August’s consumer confidence numbers were also mixed, with the Conference Board’s index moving higher and the University of Michigan’s analysis showing a slight decline. Nonetheless, both measures show Americans are more optimistic than earlier in the year and near their pre-recessionary highs. The University of Michigan’s decrease in consumer sentiment was more than likely due to pocketbook issues, such as higher gasoline prices and increased borrowing costs. At the same time, they might also be reflective of slower income growth. The Bureau of Economic Analysis reported that wages and salaries dipped in July, with personal income up just 0.1 percent, even as year-to-date growth in compensation continues to be higher.
This week, in addition to the latest international trade figures, the other highlights will be the Institute for Supply Management’s (ISM) manufacturing activity measure and the most recent jobs data. The ISM report is expected to show modest gains in new orders and activity, building on July’s strong figures. In terms of employment, nonfarm payrolls are forecasted to grow around 170,000, according to consensus estimates, with slow manufacturing growth. Outside of these measures, there will be new data on construction spending, labor productivity and new factory orders.
Chad Moutray is the chief economist, National Association of Manufacturers.