All Posts By

Chad Moutray

U.S. Trade Deficit Widened Slightly in December

By | Economy, Shopfloor Economics, Trade | No Comments

The Bureau of Economic Analysis and the Census Bureau said that the U.S. trade deficit widened slightly, up from $42.23 billion in November to $43.36 billion. The underlying data were little changed from the month before, with marginal shift in goods exports (down from $121.94 billion to $121.16 billion) and goods imports (up from $183.18 billion to $183.67 billion). The service sector trade surplus also inched up a touch, increasing from $19.02 billion to $19.16 billion. For 2015 as a whole, the trade deficit averaged $42.29 billion, which was not far from the $42.36 billion seen in 2014. Yet, the underlying data reflect some major changes behind the scenes. Goods exports were off sharply, down from an average of $136.05 billion in 2014 to $126.16 billion in 2015, and a similar trend was seen for goods imports, down from $197.84 billion to $183.48 billion.

A fair share of the reduction in goods trade over the past year can be explained by shifts in the petroleum market. Petroleum exports averaged $8.29 billion in 2015, down from $12.03 billion in 2014. Likewise, petroleum imports fell from an average of $27.83 billion in 2014 to $15.17 billion in 2015. In this latest report, the petroleum trade balance widened marginally, up from $5.46 billion to $5.93 billion. Much of the dynamics in these changes over the past year are attributable to sharply lower crude oil prices, and indeed, the average price per barrel in the December calculations ($36.60) was the lowest since January 2005. Read More


January Jobs Numbers Offer Bit of Encouragement for Manufacturers

By | Economy, General, Shopfloor Economics | No Comments

The latest data on manufacturing employment provides a bit of encouragement for manufacturers that have been beleaguered by the global slowdown and pullbacks in the energy sector. The Bureau of Labor Statistics said that manufacturing employment rose by 29,000 in January, much stronger than expected at the start of the new year. It was the fourth consecutive monthly job gain and the strongest since November 2014, when manufacturing demand and production were growing more robustly than seen today. There are currently 12.36 million workers in the sector, with manufactures adding 903,000 more employees since the Great Recession. At the same time, it is important to note that employment growth has been quite soft for much of the past year, with the sector adding just 33,000 workers in 2015. Read More

Factory Orders Fell 2.9 Percent in December

By | Economy, Shopfloor Economics | No Comments

The Census Bureau said that new factory orders fell 2.9 percent in December, declining for the fourth time in the past five months. New manufactured goods orders decreased from $470.0 billion in November to $456.5 billion in December, its lowest level since June 2011. As such, these data continue to reflect a disappointing pace of demand for manufactured products in light of recent economic slowness globally. On a year-over-year basis, new orders have declined by 3.9 percent, down from $474.9.0 billion in December 2014. Read More


Manufacturing Productivity Edged Lower in the Fourth Quarter

By | Economy, Shopfloor Economics | No Comments

The Bureau of Labor Statistics said that manufacturing labor productivity declined by 0.4 percent in the fourth quarter, pulling back after decent gains in the prior two quarters. Output grew by just 0.5 percent in the fourth quarter, down from 3.2 percent in the third quarter. Hourly compensation costs were up 3.0 percent. As a result, unit labor costs were up 3.6 percent. In general, we want unit labor costs to fall, as the improvements in efficiency help to make manufacturers more competitive globally.

For 2015 as a whole, labor productivity in the sector increased 1.3 percent, the same pace as in 2014, with output and unit labor costs up 2.2 percent and 1.3 percent, respectively. Over the longer term, however, manufacturers have benefited from being leaner in recent years, with unit labor costs down 9.8 percent since the end of the Great Recession. Durable goods firms have fared even better, with unit labor costs down 15.2 percent in that time frame. Read More

ADP: Manufacturing Employment Was Flat in January

By | Economy, General, Shopfloor Economics | No Comments

ADP said that manufacturing employment was flat in January, pulling back after hiring gains of 3,000 and 4,000 in November and December, respectively. Employment growth has been quite soft over the course of the past year, with manufacturing demand and production hampered by the global slowdown, a strong dollar and weaknesses in the energy sector. On a year-over-year basis, the ADP data show a decline of 18,000 employees on net for manufacturing since January 2015. This contrasts with Bureau of Labor Statistics data, which found an increase of 30,000 workers in 2015. New BLS data will come out on Friday for January.

Meanwhile, nonfarm payroll employment rose by 205,000 in January, pulling back from an increase of 267,000 in December. Yet, this was also not far from the 200,000 average experienced over the past 13 months. This is also the consensus expectation for nonfarm payrolls for Friday’s BLS report. In January, the largest job gains were in professional and business services (up 44,000); trade, transportation and utilities (up 35,000); construction (up 21,000) and financial activities (up 19,000). Small and medium-sized businesses (e.g., those with less than 500 employees) accounted for more than 78.5 percent of all net new workers in January.


ISM: Manufacturing Sentiment Negative for the Fourth Straight Month

By | Economy, General, Shopfloor Economics | No Comments

The Institute for Supply Management (ISM) said that manufacturing sentiment remained somewhat negative in January. The purchasing managers’ index for the sector edged marginally higher, up from 48.0 in December to 48.2 in January. It was the fourth straight month with the headline PMI under 50, which would suggest contracting sentiment among manufacturers over that time frame. This mainly reflected deteriorating employment (down from 48.0 to 45.9) and inventories (unchanged at 43.5), with the decline in hiring at its lowest level since June 2009, the last official month of the Great Recession. Indeed, manufacturers continue to worry about the impact of the global slowdown as we start the new year. This can be seen in export growth (down from 51.0 to 47.0). The exports index has contracted in seven of the past eight months on the strong dollar and soft growth abroad. Read More

personal spending

Personal Spending Slowed at Year’s End

By | Economy, Shopfloor Economics | No Comments

The Bureau of Economic Analysis said that personal spending slowed in December, up just 0.1 percent following a 0.5 percent increase in November. As such, it suggests that Americans pulled back their purchases at year’s end, mirroring other data showing soft retail sales. Indeed, durable and nondurable goods spending were both lower for the month, down 0.7 percent and 0.2 percent, respectively. Reduced motor vehicle sales (down 3.3 percent) pulled the durable goods figure lower. Service sector spending was up 0.3 percent. With that said, personal consumption expenditures have risen 3.2 percent over the past 12 months, a modest pace. This was down, however, from 4.0 percent one year ago. Read More


The U.S. Economy Slowed to Just 0.7 Percent Growth in the Fourth Quarter

By | Economy, General, Shopfloor Economics | No Comments

The Bureau of Economic Analysis said that the U.S. economy grew just 0.7 percent in the fourth quarter at the annual rate, decelerating from 3.9 percent and 2.0 percent growth in the prior two quarters, respectively. For the year as a whole, real GDP increased 2.4 percent in 2015, the same pace as observed in 2014. The preliminary data were pulled lower by weak business investment, inventory spending and net export figures, with consumer spending being one of the larger bright spots in the report. With that said, personal consumption expenditures rose an annualized 2.2 percent in the fourth quarter, easing from 3.0 percent growth in the third quarter. Consumer spending added 2.1 percent to real GDP in 2015, and in the fourth quarter, it added nearly 1.5 percentage points to the headline figure. This finding mostly mirrors decent but softer-than-desired retail spending activity seen at the end of the year, as Americans remain somewhat anxious about the economic outlook. Read More

Philly Fed: Manufacturing Activity Contracted for the Fifth Straight Month in January

By | Economy, General, Shopfloor Economics | No Comments

The Federal Reserve Bank of Philadelphia said that manufacturing activity contracted for the fifth straight month in January. The composite index of general business activity rose from -10.2 in December to -3.5 in January, and yet, the headline figure has now been in negative territory since September. (Note that prior data reflect an annual revision for seasonal adjustments.) The underlying data were mixed. The pace of decline for new orders (up from -11.1 to -1.4) slowed in this latest report. In contrast, labor market data worsened for the month, including hiring (down from 2.2 to -1.9) and the average workweek (down from 0.6 to -2.2). On the positive side, shipments (up from -2.1 to 9.6) picked up at a decent rate, expanding after three consecutive months of declines. Read More


New Housing Starts Eased in December, but Up 10.8 Percent in 2015

By | Economy, Shopfloor Economics | No Comments

The Census Bureau and the U.S. Department of Housing and Urban Development said that new housing starts eased 2.5 percent, down from an annualized 1,179,000 in November to 1,149,000 in December.  This was near the average observed in the second half of 2015, which was 1,146,000, up from an average of 1,068,000 in the first half of the year. Housing starts averaged 1,111,200 for 2015 as a whole, up 10.8 percent from the 2014 average of 1,003.300. As such, it reflects gradual improvements in residential construction over the longer term, even with the slight pullback in December activity.

Reduced single-family housing starts (down from 794,000 to 768,000) helped to explain the decrease in December, with multifamily activity also off marginally (down from 385,000 to 381,000). On the positive side, single-family residential construction in December was not far from November’s post-recessionary high, and starts in the single-family segment were up 10.4 percent in 2015. Multifamily activity has been more volatile in 2015, ranging from a low of 300,000 in February to a high of 466,000 in September. Yet, multifamily starts have also trended higher, up 11.3 percent for the year.

Housing permits also provided some encouragement, up 12.0 percent in 2015 from the average seen in 2014. Yet, permits edged lower for the month, down from 1,282,000 in November to 1,232,000 in December. The underlying data were mixed, with single-family permits higher (up from 727,000 to 740,000) and multifamily activity lower (down from 555,000 to 492,000). The single-family permits figure was the highest since December 2007, which was the first official month of the Great Recession. Since housing permits can be seen as a proxy of future residential construction activity, this is a real sign of progress and comfort for 2016.

This perhaps helps to explain why homebuilders remain optimistic, as noted in the National Association of Home Builders (NAHB) and Wells Fargo report released yesterday. The National Association of Home Builders (NAHB) and Wells Fargo said that the Housing Market Index (HMI) was unchanged in January at 60. Numbers over 50 indicate that builders are more positive than negative on net in their views of the housing market. January’s reading was the seventh consecutive month with the HMI at 60 or higher, suggesting that home builders remain mostly optimistic about the current pace of growth. Still, the headline number has decelerated after reaching a 10-year high of 65 in October, with sentiment easing a bit since then. Data were weakest in the Northeast and strongest in the West, and confidence picked up a little in January in the Midwest.

Moving forward, home builders remain upbeat about single-family sales over the next six months. While the sales index of expected single-family activity has decelerated from 75 in October to 63 in January, this continues to indicate strong demand expectations in the outlook.