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Chad Moutray

Philly Fed: Manufacturing Continues to Expand at a Robust Pace

By | Economy, Shopfloor Economics | No Comments

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

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

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

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 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

By | Economy, Shopfloor Economics | No Comments

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.

Retail Sales Picked Up in April after Slowing in February and March

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The Census Bureau said that retail sales picked up in April after slowing in February and March. Spending in the retail sector increased 0.4 percent in April, and sales in March were revised higher, up 0.1 percent instead of falling by 0.2 percent in the original estimate. After falling for three consecutive months, motor vehicle and parts sales rebounded in April, up 0.7 percent. Excluding autos, retail sales increased by 0.3 percent for the month. In general, Americans have been more willing to open his/her pocketbook this year than at this time last year; yet, consumers have been more cautious through the first four months of 2017 than we might prefer. Along those lines, retail spending has risen 4.5 percent over the past 12 months. While that represents relatively strong growth in consumer sales year-over-year, it has edged lower since measuring 5.9 percent in January. For comparison purposes, the year-over-year rate for retail sales was 2.8 percent in April 2016. Read More

Year-Over-Year Growth in Producer Prices Rose to the Fastest Pace since February 2012

By | Economy, Shopfloor Economics | No Comments

The Bureau of Labor Statistics said that producer prices for final demand goods and services increased 0.5 percent in April, bouncing back strongly after declining by 0.1 percent in March. For manufacturers, producer prices for final demand goods rose by 0.7 percent, boosted by strong gains in both food and energy costs, up 0.9 percent and 0.8 percent, respectively. On a year-over-year basis, final demand food and energy costs have risen 1.7 percent and 14.2 percent, respectively. It was second consecutive year-over-year increase in food prices for producers after declining in every month since February 2015 prior to that. Excluding food and energy, producer prices for final demand goods were up 0.3 percent.

Overall, producer prices for final demand goods and services have increased 2.5 percent since April 2016, its fastest pace since February 2012. That represents a notable acceleration in inflationary pressures after being unchanged in August. Meanwhile, core producer prices – which exclude food, energy and trade services – grew 2.1 percent year-over-year in April, up slightly from 1.8 percent in March. This will lend further credibility to the Federal Reserve’s current normalization schedule, which is currently expected to raise short-term interest rates two more times in 2017, with the next increase coming in at its June meeting.

Job Openings in Manufacturing Increased Robustly in March

By | Economy, Shopfloor Economics | No Comments

The Bureau of Labor Statistics said that there were 394,000 job openings in the manufacturing sector in March, up from 364,000 in February. This matched the reading from July 2016, and each was the fastest rate since April 2006. In March, increased job openings for both durable (up from 209,000 to 229,000) and nondurable (up from 155,000 to 165,000) goods firms helped to lift the headline number, with the durable goods pace at levels last seen in July 2007. Overall, this report suggests that manufacturing leaders are accelerating their hiring intentions in light of recent improvements in the economic outlook, including better figures for demand and production. Indeed, job openings should be a good proxy of future hiring, and as such, it bodes well for improved employment data moving forward. Read More

NFIB: Small Business Owners Remained Very Upbeat in April despite some Easing in Confidence

By | Economy, Shopfloor Economics | No Comments

The National Federation of Independent Business (NFIB) said that sentiment among small business owners in April remained near the 12-year high seen in January even as it has eased a little since then. The Small Business Optimism Index edged down from 104.7 in March to 104.5 in April. While lower than the 105.9 reading recorded in January, it is clear that owners continue to be quite optimistic since the election. Over the past five months, the headline index has averaged 105.2, illustrating the sizable uptick in confidence observed since the election. One year ago, the index was 93.6. Along those lines, the percentage of respondents suggesting that the next three months would be a “good time to expand” increased from 22 in March to 24 in April. This was down from 25 percent in January but well above the 8 percent who said the same thing in April 2016. Read More

Manufacturing Jobs Increase for Fifth Straight Month

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

Manufacturers added 6,000 workers in April, marking the fifth straight month of job gains in the sector. The U.S. unemployment rate dropped to 4.4 percent, the lowest since May 2007. Business leaders in the manufacturing sector are more upbeat in their economic outlook so far in 2017, with demand and production expanding modestly once again. As a result, hiring appears to be less cautious this year, especially relative to the loss of 16,000 workers on net seen last year. Small and medium-sized manufacturers have been essential to the turnaround in employment conditions – something that we are quite mindful of during Small Business Week. More than three-fourths of the job gains in the ADP report released earlier in the week emanated from small and medium-sized enterprises, and they account for the bulk of our membership at the NAM.

While we have seen manufacturing turn the corner economically globally, much of the increase in optimism of late stems from an expectation of more pro-growth policies emanating from Washington. Already, we have had positive engagements with the new Trump Administration, as noted in our recent thank-you campaign surrounding the first 100 days, especially when it comes to regulatory relief and a willingness to listen to the priorities of the business community.