All Posts By

Chad Moutray

durable-goods

New Durable Goods Orders Remained Weak in August

By | Economy, Shopfloor Economics | No Comments

The Census Bureau said that new durable goods orders remained weak in August, continuing a trend that we have seen over the past year or so. New order dropped from $227.0 billion in July to $226.9 billion in August, essentially unchanged for the month. Moreover, on a year-over-year basis, sales have decreased by 1.3 percent since August 2015. This highlights the ongoing challenges in the sector, including global headwinds and ongoing economic anxieties.

With that said, the headline number received a bit of a boost from transportation equipment orders in August, which were up 0.6 percent largely on stronger demand for autos and defense aircraft. Excluding transportation equipment, new orders for durable goods were down 0.4 percent in August, with 1.1 percent decreases year-over-year. This speaks to broader softness outside of transportation among durable goods manufacturers. So-called “core” capital goods orders (or nondefense capital goods excluding aircraft) were up 0.6 percent in August. That might be more encouraging, however, if demand for core capital goods were not down 3.1 percent year-over-year. Read More

Conference Board: Consumer Confidence Jumped Strongly in September to a 9-Year High

By | Economy, Shopfloor Economics | No Comments

The Conference Board said that consumer sentiment jumped strongly in September. The Consumer Confidence Index rose from 101.8 in August to 104.1 in September, its highest level since August 2007. This represented a significant improvement in Americans’ assessments of the economy since May’s dismal 92.4 reading. The strong gains in the headline number were buoyed by better perceptions about current (up from 125.3 to 128.5) and future (up from 86.1 to 87.8) conditions. With that said, this measure has been extremely volatile over the past two years, with the current reading surpassing the prior post-recession high of 103.8 in January 2015. That peak was soon followed by lingering doubts about economic growth, and this survey still reflects some of those persistent anxieties despite notable improvements. Read More

Richmond Fed: Manufacturing Activity Remained Weak in September

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The Richmond Federal Reserve Bank said that manufacturing activity in its district remained weak in September. The composite index of general business activity increased from -11 in August to -8 in September but contracted for the second straight month. Several of the underlying data points eased in the rate of decline in this report, including new orders (up from -20 to -7), shipments (up from -14 to -4) and capacity utilization (up from -19 to -11). At the same time, the labor market data were mixed. Hiring (down from 7 to -13) turned negative for the first time in three years; whereas, the average workweek (up from -4 to 1) expanded ever-so-barely in this release after narrowing in August. These findings show that manufacturers in the region continue to struggle from global headwinds and economic uncertainty. Read More

Dallas Fed: Manufacturing Conditions Improved in September, but Continued to Contract

By | Economy, Shopfloor Economics | No Comments

The Dallas Federal Reserve Bank said that manufacturing activity in its Texas district improved in September, even as sentiment has now contracted for 21 straight months. The composite index of general business conditions increased from -6.2 in August to -3.7 in September, bringing this measure closer to neutral territory. Despite the negative figure in the composite measure, most of the underlying data points reflected strengthening levels of growth in September. This included production (up from 4.5 to 16.7), shipments (up from 9.9 to 20.1) and capacity utilization (up from 0.9 to 13.5). On the other hand, new orders (down from 5.3 to -2.9) shrank once again in September, falling for the eighth time in the past 10 months.

With that in mind, it should not be a surprise that manufacturers in the Dallas Fed region remain cautious in their outlook. As one computer and electronic products respondent put it, “We continue to bump along in a low-growth environment. We don’t see that changing at any point in the future. Things are not bad, but are not good.” On the positive side, hiring (up from -5.0 to 2.3) and capital spending (up from -5.7 to 3.1) both rebounded in September, with each expanding slightly after contracting in August. Along those lines, a few of the sample comments noted difficulties in attracting and retaining skilled talent.

Moving forward, manufacturing leaders were mostly positive about the next six months, but with some easing in perceptions from the prior release. Expected indices for new orders (down from 38.6 to 29.1), production (down from 32.8 to 30.5), shipments (down from 30.0 to 26.1), employment (down from 21.7 to 14.5) and capital expenditures (down from 14.7 to 13.5) moved lower but continued to reflect sizable growth ahead. The forward-looking composite index rose from 7.0 to 9.3, expanding for the fourth straight month. At the same time, these figures also indicate a more-mixed environment than seen at first glance. Just over half of those completing the survey anticipated orders to be unchanged over the next six months, with 39.2 percent predicting gains.

Kansas City Fed: Manufacturing Activity Rebounded a Little in August

By | Economy, Shopfloor Economics | No Comments

Manufacturing activity rebounded in the Kansas City Federal Reserve Bank’s district in September, expanding after two months of declines. The composite index of general business conditions increased from -4 in August to 6 in September, its fastest pace of growth since December 2014. Indeed, there were rather strong gains seen for new orders (up from -7 to 12), production (up from -7 to 15) and shipments (up from -4 to 16) to support the improved sentiment seen in this survey’s headline number. To be fair, though, the sector also continues to have a number of challenges. Most notably, that includes exports (up from -10 to -4), which contracted for the eighth consecutive month. Manufacturers in the Kansas City region – not unlike their peers in other districts – have had to grapple with a strong U.S. dollar and weaknesses abroad, both of which have dampened international demand.

The labor market data were mixed. On the one hand, hiring activity (up from -10 to -3) remains soft, even with some easing in the rate of decline in September. The index for the number of employees has been negative now for 21 straight months. At the same time, employers appear to be expanding hours worked (up from 4 to 5), with that measure positive for the fourth consecutive report. Sample comments tended to highlight challenges with attracting new talent, highlighting the skills gap seen in the sector.

Meanwhile, manufacturers continue to be somewhat upbeat about the next six months. The forward-looking composite index edged down from 11 to 10, but it has now been positive each month since April. At least 40 percent of respondents expect sales and output to grow moving forward, which is somewhat promising. Yet, those completing the survey were also less hopeful for hiring, capital spending and export growth over the next six months, showing how cautious business leaders are right now, with expected growth remaining negative.

Federal Reserve Left Interest Rates Unchanged at its September Meeting

By | Economy, Shopfloor Economics, Shopfloor Main | No Comments

The Federal Open Market Committee (FOMC) left short-term interest rates unchanged at the conclusion of its September 20–21 meeting, as expected. Indeed, in the latest NAM Manufacturers’ Outlook Survey, 45.5 percent of respondents felt that the Federal Reserve would wait until its December 13–14 meeting, mirroring consensus expectations. (The FOMC does have another meeting scheduled for November 1–2, but they are unlikely to act just a few days before the U.S. General Election.) The press release sets up a possible rate hike later this year, with the following language: “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” Recent softness in a number of economic measures were enough for the FOMC to hit the pause button, at least for now. Read More

housing-market

New Housing Starts Were Weaker in August

By | Economy, Shopfloor Economics | No Comments

The Census Bureau and the U.S. Department of Housing and Urban Development said that new housing starts were weaker in August, once again pulling back after passing the 1.2 million units threshold. New residential construction activity decreased from an annualized 1,212,000 units in July to 1,142,000 in August, a decline of 5.8 percent. As such, it stood in contrast to yesterday’s strong jump in home builder confidence from the National Association of Home Builders. That figure suggested that builders were quite optimistic about the next six months, spurred by modest economic growth and historically low mortgage rates. Along those line, I continue to expect 1.21 million housing units started by year’s end despite today’s disappointing numbers for August, particularly for single-family activity. Read More

production

Manufacturing Production Data for August Were Disappointing

By | Economy, Shopfloor Economics, Shopfloor Main | No Comments

According to the Federal Reserve, manufacturing production fell by 0.4 percent in August. After two straight months of gains, this news was disappointing, even as it mirrored weaknesses found in other economic indicators in August. Moreover, manufacturing production has declined over the past 12 months, the first year-over-year decline since December. In addition, manufacturing capacity utilization decreased from 75.2 percent to 74.8 percent, a three-month low. As such, this report highlights the tremendous challenges in the sector. Nonetheless, manufacturers continue to be cautiously hopeful for increased activity over the coming months, as noted in our latest survey.

The current softness, though, means that policymakers need to focus more on priorities that will grow the economy and increase competitiveness. It also suggests that the Federal Reserve is likely to wait to raise rates. Along those lines, 45.5 percent of respondents to our survey felt that the Federal Open Market Committee would hike rates in December.

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mfg-survey

NAM Outlook Survey shows improvements in expected growth, but lingering challenges

By | Economy, Shopfloor Economics, Shopfloor Main | No Comments

In the latest NAM Manufacturers’ Outlook Survey, sentiment appears to have stabilized after several quarters of declining assessments about the economic outlook, and the latest data appear to mostly back that assertion up, but with some caveats. Indeed, economic challenges continue in the sector, among them being concerns over rising health care costs and dampening perceived growth rates over the next 12 months despite some progress in this release. Large manufacturers were more upbeat about their company’s outlook this quarter, but small and medium-sized manufacturers experienced declines in their outlook in this survey. Overall, one could characterize manufacturers’ current economic outlook as cautiously encouraging, but still less-than-desired and highly varied by firm size and export sales growth expectations.

In this survey, 61.0 percent of manufacturers are either somewhat or very positive about their own company’s outlook, easing slightly from 61.7 percent who said the same thing in June. Yet, the outlook remained stronger than at the end of last year and the beginning of this year, marking some progress from earlier softness. At the same time, this marks the fifth consecutive quarter when positive responses about the outlook have fallen below the historic average of 73.0 percent. Read More

NFIB: Small Business Sentiment Was Mostly Stable in August

By | Economy, Shopfloor Economics | No Comments

The National Federation of Independent Business (NFIB) said that sentiment among small business owners was mostly stable in August. The Small Business Optimism Index edged down from 94.6 in July to 94.4 in August, hovering around 94.5 for the third straight month and generally improving since achieving a two-year low in March (92.6). Nonetheless, small firms continue to be cautious in their economic outlook, with the headline number remaining below 100, the threshold which would suggest more-robust growth in the sector. Indeed, the underlying data points for August provided a mixed message even while the longer-term trend indicates a mild degree of progress. Read More