All Posts By

Chad Moutray

New Durable Goods Orders Declined in April, Ending Four Straight Months of Gains

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The Census Bureau said that growth in new durable goods orders declined 0.7 percent in April, ending four straight months of gains. New orders fell from $232.7 billion in April to $231.2 billion in March. With that said, much of the decrease in April stemmed from a drop in nondefense aircraft and parts orders, down 9.2 percent, which can often be quite volatile from month-to-month. Excluding transportation, new orders for nondurable goods were off by 0.4 percent, down from $153.3 billion to $152.7 billion. Despite the weaker data in this release, new durable goods orders have generally trended in the right direction lately after stalling for much of the past two years. New durable goods have edged up just 0.9 percent since April 2016, but excluding transportation, the year-over-year gain was 4.9 percent. Read More

First Quarter Real GDP Revised from 0.7% to 1.2% Growth

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The Bureau of Economic Analysis reported that the U.S. economy grew 1.2 percent in the first quarter in newly revised figures. This improved slightly from the earlier estimate of 0.7 percent growth, but nonetheless, it continued to represent a slow start to the year. The upward revision stemmed mainly from improved data on consumer and business spending, even as the drag from inventory spending was somewhat larger.

To be fair, we traditionally have a sluggish first quarter followed by a strong rebound in the second quarter. My current forecast is for at least 3.0 percent growth in real GDP in the second quarter, with the economy expanding 2.2 percent for 2017 as a whole. Of course, these estimates might drift higher with passage of more pro-growth policies, especially in terms of the outlook later this year and into 2018.

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Kansas City Fed: Manufacturing Activity Expanded for the Sixth Straight Month, up Modestly in May

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The Kansas City Federal Reserve Bank said that manufacturing activity expanded for the sixth straight month even as it pulled back once again from March’s six-year high. The composite index of general business conditions edged higher, up from 7 in April to 8 in May. In general, manufacturers report notable improvements in activity relative to this time last year, despite some easing in activity in many measures in this latest survey. Along those lines, the underlying data points were mixed in May. Growth for new orders (up from 8 to 9), employment (up from 9 to 11) and the average workweek (up from -4 to 1) accelerated slightly for the month; whereas, shipments (down from 11 to 3) and production (down from 12 to -1) each softened. It was the first contraction in output since August. On an encouraging note, exports (unchanged at 4) grew for the fourth consecutive month.   Read More

Richmond Fed: Manufacturing Growth Stalled in May

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The Richmond Federal Reserve Bank said that manufacturing activity in its district stalled in May, pulling back for the second straight month from March’s seven-year high. The composite index of general business activity declined from 22 in March to 20 in April to 1 in May. On the positive side, it was the seventh straight monthly expansion in the mid-Atlantic region. Still, it was clear that manufacturers in the Richmond Fed region were less optimistic about current conditions in this month’s survey, including neutral growth for new orders (down from 26 to zero) and reduced activity for shipments (down from 25 to -2), capacity utilization (down from 22 to -9) and the average workweek (down from 8 to -3). Nonetheless, there was a slight pickup in hiring (up from 5 to 6). Read More

IHS Markit: Eurozone Manufacturing Activity Rose Again in May to another Six-Year High

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The IHS Markit Flash Eurozone Manufacturing PMI inched up from 56.7 in April to 57.0 in May, its fastest pace since April 2011. This suggests that manufacturers in Europe have mostly brushed off political uncertainties, with economic growth on the continent continuing to trend in the right direction. The underlying data were encouraging, including new orders (unchanged at 57.7), output (up from 57.9 to 58.4), exports (up from 57.4 to 57.6) and employment (up from 55.5 to 56.2). Activity in Germany (up from 58.2 to 59.4) mirrored the larger Eurozone headline number, with its manufacturing PMI figure also rising to a 73-month high. At the same time, French manufacturers (down from 55.1 to 54.0) cited modest expansions in activity in May, even as it pulled back from April’s six-year high. The larger story for France, though, is that its manufacturing sector has expanded for eight straight months – a sign that its growth is beginning to turn around.

Meanwhile, the IHS Markit Flash U.S. Manufacturing PMI eased to its slowest growth rate since September, down from 52.8 in April to 52.5 in May. It was the fourth consecutive monthly decline, down from 55.0 in January, which was the fastest growth rate in nearly two years. Nonetheless, we continue to see modest growth overall in sector nationally, even with decelerated accelerations across-the-board. This includes new orders (down from 53.7 to 53.4), output (down from 53.4 to 53.3), exports (down from 52.1 to 51.3) and hiring (down from 52.5 to 51.9). Looking ahead 12 months, manufacturers in the U.S. continued to be optimistic about future output (up from 65.9 to 66.5).

Philly Fed: Manufacturing Continues to Expand at a Robust Pace

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The Federal Reserve Bank of Philadelphia said that manufacturing activity continued to expand at a robust pace in May. The composite index of general business activity increased from 22.0 in April to 38.8 in May. February’s 43.3 figure was the highest reading since November 1983, and this latest figure was the best since then. The headline number in May was boosted by strong growth in shipments (up from 23.4 to 39.1), with the percentage of respondents suggesting that their shipments had increased rising from 38.5 percent in April to 48.4 percent in May. In addition, there were strong gains seen for new orders (down from 27.4 to 25.4), employment (down from 19.9 to 17.3) and the average workweek (up from 18.9 to 21.7), even with some easing in a couple of these measures. The rate of expansion for the average employee workweek was at a level not seen since October 1987. Read More

Manufacturing Production Rebounded Strongly in April

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The Federal Reserve said that manufacturing production rebounded strongly in April after pulling back in March. Output in the sector rose by 1.0 percent, led by a significant recovery in motor vehicles and parts production, up 5.0 percent, among others. It was the sixth time in the past seven months that manufacturing production has increased. While the sector continues to have some lingering challenges, this report is yet another sign that the sector has turned a corner and is moving in the right direction. Indeed, manufacturing production has increased 1.7 percent over the past 12 months, its strongest year-over-year pace since January 2015. Similarly, manufacturing capacity utilization jumped from 75.2 percent to 75.9 percent, a level not seen since December 2014.

Digging into the underlying data, durable and nondurable goods output were both up by 1.0 percent in April, mirroring the manufacturing sector as a whole. Beyond automotive, the largest gains in the sector were seen in the following segments: petroleum and coal products (up 2.5 percent), electrical equipment and appliances (up 1.8 percent), miscellaneous durable goods (up 1.8 percent), food, beverage and tobacco products (up 1.6 percent), textile and product mills (up 1.4 percent), printing and support (up 1.0 percent), machinery (up 0.9 percent), plastics and rubber products (up 0.9 percent) and paper (up 0.8 percent). In contrast, there was reduced production for the month in the nonmetallic mineral products (down 1.0 percent), aerospace and miscellaneous transportation equipment (down 0.7 percent), primary metals (down 0.6 percent) and apparel and leather (down 0.1 percent) sectors.

Meanwhile, total industrial production also increased by 1.0 percent in April, its fastest monthly gain in just over three years. In addition to manufacturing, mining and utilities output were higher for the month, up 1.2 percent and 0.7 percent. Over the past 12 months, total industrial production has risen 2.2 percent. Much like the manufacturing data described above, that was the highest year-over-year rate since January 2015, and it was a definite improvement from the -1.7 percent year-over-year rate seen one year ago. Mining production has increased 7.3 percent year-over-year, but utilities output was off by 0.5 percent since April 2016. Capacity utilization rose from 76.1 percent to 76.7 percent, a 20-month high.

Housing Starts Were Disappointing in April, Down for the Second Straight Month

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The Census Bureau and the U.S. Department of Housing and Urban Development said that new housing starts were disappointing in April, down for the second straight month. New residential construction fell from an annualized 1,203,000 in March to 1,172,000 in April, its first reading below 1.2 million units since November. Housing starts had been predicated to rebound from March’s weather-influenced lull, with a consensus expectation of 1.25 million units. Indeed, we did see a rebound in housing starts in both the Midwest and West, but the decline in March stemmed largely from a drop in activity in the Northeast and South. In terms of unit size, the highly-volatile multifamily segment eased for the second month, down from 371,000 in March to 337,000 in April. In contrast, single-family activity inched up from 832,000 to 835,000, but that figure remained down from February’s 877,000-unit pace. Read More

New York Fed: Manufacturing Activity Softened in May

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The Empire State Manufacturing Survey said that manufacturing softened in May, with activity falling for the first time since October. The composite index of general business conditions declined from 5.2 in April to -1.0 in May. The contraction in the headline number stemmed from decreases in both new orders (down from 7.0 to -4.4) and unfilled orders (down from 12.4 to -3.7), with the percentage of respondents saying that new orders were higher for the month dropping from 32.6 percent in April to 20.7 percent in May. Roughly one-quarter of those completing the survey cited declining sales in both surveys. At the same time, other measures continued to report modest growth in May, albeit with some easing in the latest results. This included shipments (down from 13.7 to 10.6), employment (down from 13.9 to 11.9) and the average workweek (down from 8.8 to 7.5).

Even with some weaker data in May, manufacturers in the New York region remained quite upbeat about the next six months. Indeed the forward-looking composite index edged down from 39.9 to 39.3, with more than half of those responding suggesting that future conditions had improved in this release. Along those lines, there were better data for expected new orders (up from 31.0 to 33.2) and shipments (up from 29.2 to 37.8), and anticipated growth in employment (down from 19.7 to 17.2), capital expenditures (down from 27.7 to 13.4) and technology spending (down from 15.3 to 13.4) remained decent despite some deceleration in May’s indices. With that said, the average workweek (down from 17.5 to 5.2) was seen notably slowing over the next six months, and pricing pressures (up from 37.2 to 38.1) are expected to remain highly elevated.

Consumer Prices Edged Slightly Higher in April, up 0.2%

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The Bureau of Labor Statistics said that consumer prices edged slightly higher in April, up 0.2 percent, after declining somewhat in March. The higher figure stemmed largely from an increase in energy costs, up 1.1 percent, rebounding from decreases in both February and March. Gasoline prices have jumped 14.3 percent over the past 12 months. At the same time, food prices increased by 0.2 percent in April, rising for the fourth straight month, but with year-over-year growth of just 0.5 percent. Overall, the consumer price index (CPI) increased 2.2 percent year-over-year in April, down from 2.8 percent in February and 2.4 percent in March. In April 2016, the CPI rose 1.1 percent, illustrating the acceleration in prices since then.

Core consumer prices, which exclude food and energy costs, edged up 0.1 percent in April and rebounding from a similar decline in March. Excluding food and energy costs, consumer prices have increased 1.9 percent over the past 12 months, pulling back a little from 2.0 percent in the prior report. That was the first time the year-over-year core inflation rate has fallen below 2.0 percent since October 2015. For now, overall pricing pressures remain modest and mostly under control, even with a pickup in the total CPI growth in recent months.