All Posts By

Chad Moutray


Manufacturing Construction Rebounded by 2.2 Percent in March

By | Economy, Shopfloor Economics | No Comments

The Census Bureau said that private manufacturing construction spending rebounded somewhat in March. The value of construction put in place rose from $77.61 billion at the annual rate in February to $79.33 billion in March, up 2.2 percent for the month. Since achieving the all-time high of $89.65 billion in May 2015, construction activity in the manufacturing sector has ebbed somewhat. Yet, the larger trend has been a positive one, boosted in particular by increased investments in the chemical sector, which continues to benefit from cost advantages in the energy sector. To illustrate this growth, manufacturing construction has risen by 55.0 percent over the past 24 months, even as the year-over-year pace was a decline of 2.0 percent.   Read More


ISM: Manufacturing Activity Expanded for Second Straight Month, Slowing a Little in April

By | Economy, General, Shopfloor Economics | No Comments

The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) expanded for the second straight month, albeit at a slower pace in April. The composite index declined from 51.8 in March to 50.8 in April, but even with the decrease, this represented progress in the manufacturing sector after contracting for five consecutive months from October through February. New orders (down from 58.3 to 55.8) and production (down from 55.3 to 54.2) each grew at decent rates for the month despite some easing in this release, and exports (up from 52.0 to 52.5) accelerated, increasing for only the third time in the last 12 months.

Last month’s release helped to fuel the narrative that manufacturing activity was starting to stabilize, and the current data mostly support that view. At the same time, though, manufacturers remain challenged by global headwinds and still-low commodity prices, and a number of economic indicators have been disappointing, highlighting the fact that business’ struggles are still far from over. The sample comments tended to echo this nuanced view of modest improvements, with some respondents noting a pickup in sales while others cited ongoing sluggishness. One’s perspective was likely industry-specific. Read More

personal spending

Personal Spending Remained Soft in March Despite Decent Income Growth

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The Bureau of Economic Analysis said that personal spending remained soft in March, up just 0.1 percent, despite decent income growth. Personal consumption expenditures had increased by 0.2 percent in January and February. Reduced motor vehicle spending in March helped to drag down durable goods spending by 0.6 percent, but this was offset by a similar increase in nondurable goods purchases. With slower spending, the savings rate rose to 5.4 percent, its highest level since February 2015. Despite this, personal consumption expenditures continued to grow at a modest pace year-over-year, down from 3.9 percent in February to 3.5 percent in March. As such, consumer spending remains one of the brighter spots in the U.S. economy, even as it remains clear that Americans might be holding back somewhat from making larger purchases. Read More

regional Fed

Kansas City Fed: Manufacturing Activity Continued to Decline in April, but the Outlook Improved

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The Kansas City Federal Reserve Bank said that manufacturing activity continued to decline in April, contracting for the 14th straight month. Reduced crude oil prices, the strong dollar and weaknesses abroad have pressured the sector’s performance, especially since the district includes energy-intensive Oklahoma. With that said, the pace of decline slowed for production (up from -14 to -8), shipments (up from -15 to -6), exports (up from -10 to -4) and the average workweek (up from -10 to -6). New orders remained slightly negative (unchanged at -2), and hiring continued to lag behind (unchanged at -12). Despite the negative seasonally-adjusted figure, one-third of respondents had increased new orders for the month, with 29 percent citing declines.

Meanwhile, the forward-looking data composite index returned to positive territory, up from -2 in March to 10 in April, its highest level in 14 months. Indeed, manufacturers in the Kansas City Fed’s district appeared to be more upbeat in April, with greatly-improved assessments for future orders (up from zero to 20), production (up from 5 to 25) and shipments (up from 5 to 27). More than 40 percent of those completing the survey expected increases in each of those three activities over the next six months. In addition, more respondents expect increased employment (up from 1 to 8) and a longer average workweek (up from 3 to 8), with modest gains seen in the labor market. Nonetheless, it was not all good news. Exports (up from zero to 1) were anticipated to remain marginally positive over the coming months, and capital expenditures (up from -9 to -6) were expected to continue to contract.


The U.S. Economy Had Sluggish Start to 2016

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The Bureau of Economic Analysis said that the U.S. economy grew just 0.5 percent in the first quarter of 2016, signifying a sluggish start to the year. This was slightly below the consensus estimate of real GDP growth of 0.7 percent, and it was down from 1.4 percent growth in the fourth quarter of 2015. In many ways, the data for the first quarter mirrored the trends seen in the prior report, with drags on growth coming from fixed business investment and net exports. Consumer spending on goods was the difference-maker in this release.  While personal consumption continued to be one of the brighter spots, adding 1.27 percentage points to headline GDP growth, that increase stemmed almost entirely from spending on services. The gain from goods spending was negligible – adding just 0.03 percentage points. This finding is consistent with the disappointing retail sales numbers observed year-to-date, particularly for durable goods, and it was another sign that Americans have pulled back on their purchases as a result of anxieties in the economic outlook. Read More

Federal Reserve Leaves Rates Unchanged, as Expected, Signaling Caution Moving Forward

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The Federal Reserve left short-term interest rates unchanged, as expected, at the conclusion of the Federal Open Market Committee (FOMC) meeting. In its statement, the FOMC acknowledged that “economic activity appears to have slowed” despite progress in some areas, most notably in the labor market. As such, it left the federal funds rate at the ¼ to ½ percent target range that it established at its December meeting. More importantly, participants appear to not be a hurry to raise rate, expressing some caution moving forward. They write, “The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the long run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

At their prior meeting, the economic projections signaled two interest rate increases in 2016, each by 25 basis points. By itself, that was an admission that economic conditions no longer warranted four rate increases this year – the stated goal coming into 2016. The consensus among most economist had been for the FOMC to hike interest rates again at its June 14–15 meeting. That could still happen, but that will hinge on better data coming in between now and then. Hopefully, improvements in the broader economy would include manufacturing, which continues to lag other segments. With that said, this press release would seem to indicate that a June rate increase just became less likely.

Kansas City Federal Reserve Bank President Esther L. George dissented in her vote. She has established herself as an inflation hawk, and she would have preferred for the FOMC to have raised the federal funds rate to ½ to ¾ percent at this meeting.

Richmond Fed: Manufacturing Activity Expanded for the Second Straight Month in April

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The Richmond Federal Reserve Bank said that manufacturing activity expanded for the second straight month in April. The composite index of general business activity declined from 22 in March to 14 in April. More importantly, the relatively strong data seen in this report are consistent with some stabilization in activity following significant softness over the course of the past year. For instance, new orders (down from 24 to 18) and shipments (down from 27 to 14) each expanded strongly in April despite some easing in the pace of growth in this latest report. Capacity utilization (up from 17 to 18) accelerated slightly in April, its highest point since December 2010. In addition, the labor market variables continued to grow modestly, with some pullback for the month, including hiring (down from 11 to 8) and the average workweek (down from 16 to 9). Read More

durable goods

New Durable Goods Sales Rebounded Somewhat in March, but Weaker Than Expected

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The Census Bureau said that new durable goods orders increased by 0.8 percent in March, rebounding somewhat after the 3.1 percent decline seen in February. This was weaker-than-expected, with a consensus expecting a gain of 1.8 percent. Sales of new durable goods orders rose from $228.9 billion in February to $230.7 billion in March. Overall, demand remains quite soft, with the sector challenged by global headwinds and lingering anxieties in the economic outlook. Order volumes have been highly volatile from month-to-month over the course of the past year, with sales trending lower since peaking in 2015 at $241.0 billion in July. On a year-over-year basis, new durable goods orders have fallen 2.5 percent, down from $236.7 billion in March 2015. Even with transportation equipment sales excluded, year-over-year growth declined by 1.4 percent, with orders down 0.2 percent for the month, highlighting the broad-based softness of demand for durable goods over the past 12 months. Read More

Dallas Fed: Despite Negative Current Outlook, Texas Manufacturing Activity Picked Up in April

By | Economy, Shopfloor Economics | No Comments

The Dallas Federal Reserve Bank reported mixed news on Texas manufacturing activity in April. The composite index of general business conditions remained mired in negative territory, down from -13.6 in March to -13.9 in April. It was the 16th straight month with respondents having a negative outlook about the current economic environment. The sample comments mostly echoed these sentiments, highlighting ongoing challenges in the market. Yet, beyond the headline number, the data were more encouraging, suggesting some stabilization in activity in April. Indeed, measures for new orders (up from -4.8 to 6.2), production (up from 3.3 to 5.8), shipments (up from 0.3 to 7.1), capacity utilization (up from 3.3 to 8.2) and capital expenditures (up from -0.9 to 1.6) each accelerated for the month. To illustrate this progress, 30.1 percent of respondents cited increased new orders in April, up from 23.8 percent saying the same thing in March. Read More

Markit: U.S. Manufacturing Activity Grew at the Slowest Pace since September 2009

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U.S. manufacturing activity grew at the slowest pace since September 2009, according to preliminary figures from Markit. The Markit Flash U.S. Manufacturing PMI decreased from 51.5 in March to 50.8 in April. In general, the strong dollar and weaknesses abroad have dampened international demand and overall sentiment over the course of the past year. Manufacturing activity has decelerated significantly over the past 12 months, with the main PMI number down from 54.2 in April 2015. In this report, output (down from 51.4 to 50.3) and hiring (down from 52.1 to 50.2) each pulled back to a near-standstill, with exports (down from 50.0 to 48.5) contracting for the second time in the past three months. On the other hand, new orders (down from 52.8 to 52.0) continued to expand modestly, but with some easing for the month.

As such, this report stands in sharp contrast to the better-than-expected sentiment seen in the competing data from the Institute for Supply Management (ISM). In that release, new orders and output each grew surprisingly strong in March, lifting its manufacturing PMI value above 50 for the first time since August. It provided some encouragement after months of softness, even as other economic data – including this one from Markit – continue to suggest ongoing challenges. Read More