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Personal Spending Picked Up Strongly in May

The Bureau of Economic Analysis said that personal spending rose 0.9 percent in May, rebounding from a more-cautious 0.1 percent growth rate observed in April. It was the fastest monthly growth rate since August 2009. From the manufacturing perspective, this was welcome news, with spending on durable and nondurable goods up 2.2 percent and 1.9 percent, respectively. More importantly, it provides some encouragement that Americans might return to opening their wallets – something that there has been more hesitance to do so far this year. The year-over-year rate of personal spending in May, 3.6 percent, was the highest since December, up from 3.1 percent since in April. (continue reading…)

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First Quarter Real GDP Upwardly Revised to a Decline of 0.2 Percent

The Bureau of Economic Analysis said that the U.S. economy shrank by 0.2 percent in the first quarter. This second revision was an improvement upon the 0.7 percent decline seen in the previous estimate. Looking at the newer data, the improvement came from slightly better figures for personal consumption, nonresidential fixed investments, inventory replenishment, and state and local government spending. Yet, the underlying trends were not altered much, including the following:

  • The largest drag on growth in the first quarter was from net exports, subtracting 1.9 percentage points from the headline number. In this revision, the decline in goods exports was slower than in the prior release (down 7.5 percent instead of 14.0 percent), but this was offset by a bigger increase in goods imports (up 7.2 percent instead of 5.1 percent). International demand for manufactured goods exports has been dampened by the strong dollar and continued softness in economic markets abroad. (continue reading…)
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Richmond Fed: Manufacturing Activity Expanded at Fastest Rate since January

The Richmond Federal Reserve Bank reported that manufacturing activity expanded at its fastest pace since January – a sign that the sector has made progress since the spring. The composite index of general business activity improved from 1 in May to 6 in June. This figure was boosted, in particular, by stronger new orders (up from 2 to 11), its highest level since October. Shipments (up from -1 to zero) were unchanged for the month, but that represented some stabilization after four straight months of contraction. Overall, this report found modest growth in the manufacturing sector in the Richmond Fed district, which – while not as strong as we might prefer – found sentiment moving in the right direction. (continue reading…)

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Markit: Eurozone Manufacturers Report Fastest Growth since April 2014

The Markit Flash Eurozone Manufacturing PMI increased from 52.2 in May to 52.5 in June, its fastest pace of growth since April 2014. (The composite measure, which adds in services, rose to a 49-month high.) For manufacturers, output (up from 53.3 to 53.5) and employment (up from 51.6 to 52.0) both edged higher, with each expanding modestly. At the same time, there were slight easings for new orders (down from 52.7 to 52.5) and exports (down from 53.2 to 52.6). Nonetheless, the underlying story is a positive one, with Europe making significant progress in recent months and brushing off possible risks from Greece. With that said, robust growth continues to be elusive, with real GDP up 0.4 percent in the first quarter and industrial production up just 0.1 percent in April. On a year-over-year basis, the Eurozone grew 1.0 percent, with industrial output up 0.8 percent. (continue reading…)

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Reduced Aircraft Sales Push Durable Goods Orders Lower, with Broader Market Edging Higher

The Census Bureau said that new durable goods orders declined by 1.8 percent in May, extending the 1.5 percent decrease observed in April. Nonetheless, while April’s lower data reflected broader softness in the market, the May pullback mainly reflected reduced aircraft sales for the month. Aircraft orders are often bulked together in batches, making them more volatile from month-to-month. As a whole, transportation equipment orders fell 5.4 percent in May, largely on the decreases for aircraft. Motor vehicles sales were flat. On the positive side, we would expect a significant uptick in this category in the June data, with aircraft sales lifted by the recent Paris Air Show. (continue reading…)

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Monday Economic Report – June 22, 2015

Here is the summary for this week’s Monday Economic Report: 

Last week, one media outlet reported that manufacturing has been in a “technical recession” for the past six months. I am more hesitant to use the R-word to describe the sector’s performance year-to-date, and in my view, this description somewhat overstates the significance of broader market trends, particularly for expectations moving forward. At the same time, manufacturing production has declined since late last year, as illustrated in the graphic below. A number of significant economic headwinds have reduced output in four of the past six months, reducing the year-over-year pace of growth in the sector from 4.5 percent in November to 1.8 percent in May. Capacity utilization has also declined for five consecutive months, down from 78.1 percent in December to 77.0 percent in May. (continue reading…)

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Michigan Had the Greatest Manufacturing Job Gains in May

Michigan created the most net new jobs in May, according to the most recent state employment figures from the Bureau of Labor Statistics. With the motor vehicle and parts output rebounding from softness earlier in the year, Michigan’s manufacturing sector added 6,600 more workers on net in the month. Michigan has also generated the most hiring since the end of 2013, with 32,800 additional employees in May 2015 than in December 2013. Other top states for manufacturing employment growth in May included Kansas (up 2,600), Louisiana (up 2,100), New York (up 2,100) and Indiana (up 2,000). Over the past 17 months, Ohio (up 23,300), Indiana (up 21,300), North Carolina (up 14,900) and Wisconsin (up 13,300) helped to round out the top five states for manufacturing hiring. (continue reading…)

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Philly Fed: Manufacturing Activity Rose to Its Highest Level of 2015 So Far

The Federal Reserve Bank of Philadelphia said that new orders and shipments rebounded in June, lifting its headline manufacturing index to its highest level of 2015 so far. The composite index of general business activity rose from 6.7 in May to 15.2 in June, with the indices for orders (up from 4.0 to 15.2) and shipments (up from 1.0 to 14.3) each up strongly. The key to each of these measures was a drop in the percent saying that activity was declining. For instance, the percentage of respondents suggesting that shipments had declined in the month fell from 28.5 percent in May to 16.0 percent in June. This indicates that manufacturing activity has stabilized from weaknesses earlier in the year, providing some encouragement moving forward. (continue reading…)

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Higher Gasoline Costs Help Increase Consumer Prices at Fastest Pace in Over 2 Years

The Bureau of Labor Statistics said that the consumer price index rose by 0.4 percent in May, its fastest monthly pace since February 2013. This was largely due to higher gasoline prices, which increased 10.4 percent for the month. Indeed, the average price of regular conventional gasoline was $2.656 per gallon on June 1, up from $2.451 a gallon on April 27, according to the Energy Information Administration (EIA). (It has risen further since then, averaging $2.744 per gallon on June 15.) To be fair, of course, gasoline prices remain lower than they were one year ago, down 25.0 percent year-over-year. For instance, the EIA data suggest that the average price of regular gasoline on June 16, 2014, was $3.621 per gallon. (continue reading…)

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The Federal Reserve Downgraded its Forecast for 2015, Maintained its Existing Policies for Now

The Federal Reserve downgraded its forecast for growth for 2015 in its latest economic projections. Fed participants now expect real GDP to grow between 1.8 and 2.0 percent this year, down from an estimate of 2.3 to 2.7 percent growth seen in its March forecast. Indeed, this represented the second downward revision in growth estimates for the year, decelerating from the 2.6 to 3.0 percent outlook observed in December. As such, the reduced outlook for the economy this year from the Federal Reserve mirrors similar drops in growth estimates from other economists – including me – in light of softer-than-desired performance over the past six months, both in the U.S. and globally. This is consistent with the latest NAM Manufacturers Outlook Survey, which found that respondents were less upbeat about future activity in light of headwinds from a stronger dollar, weaknesses abroad, lower crude oil prices and a still-cautious consumer.

(continue reading…)

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