Shopfloor Economics

Consumer Prices Edged Up 0.1 Percent in July, but Inflationary Pressures Have Cooled Overall

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The Bureau of Labor Statistics said that consumer prices edged up 0.1 percent in July, ticking slightly higher after being unchanged in June. Food prices rose by 0.2 percent for the month, but that was partially offset by a decline in energy costs of 0.1 percent. Since July 2016, food and energy costs have increased 1.1 percent and 3.4 percent, respectively.

Overall, the consumer price index (CPI) increased 1.7 percent year-over-year in July, inching up from 1.6 percent in June. Pricing pressures had accelerated over much of the past year, increasing from 0.9 percent year-over-year in July 2016 to 2.8 percent year-over-year in February. However, inflation has cooled since then. Read More

Producer Prices Inched Down 0.1 Percent in July, with Year-Over-Year Growth Steady at 2.0 Percent

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The Bureau of Labor Statistics said that producer prices for final demand goods and services inched down 0.1 percent in July, offsetting the 0.1 percent gain seen in June. For manufacturers, producer prices for final demand goods were off by 0.1 percent in July after rising by 0.2 percent in June. Energy prices pulled back for the third straight month, down 0.3 percent, with food prices flat. On a year-over-year basis, final demand food and energy costs have risen 1.9 percent and 4.3 percent, respectively. Excluding food and energy, producer prices for final demand goods were also down 0.1 percent.

Overall, producer prices for final demand goods and services have increased 2.0 percent since July 2016, remaining steady with June’s rate but decelerating from April’s 2.5 percent year-over-year pace, which was the fastest pace since February 2012. Nonetheless, raw material costs have accelerated over the course of the past 12 months, as the year-over-year rate was zero percent one year ago. In a similar way, core producer prices – which exclude food, energy and trade services – have grown 1.9 percent year-over-year, slowing from 2.1 percent in the prior release but up from 1.0 percent in July 2016.

Manufacturing Labor Productivity Grew Modestly in the Second Quarter

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The Bureau of Labor Statistics reported that manufacturing labor productivity grew modestly in the second quarter, up 2.5 percent, rebounding from the 0.3 percent gain seen in the first quarter. It was the third straight quarterly increase in productivity in the sector, improving from two consecutive declines in mid-2016. In this release, manufacturing output rose by 1.6 percent, slowing somewhat from the first quarter’s 2.4 percent increase. The increase in productivity stemmed from a 0.9 percent decrease in hours worked, and as a result, unit labor costs edged down 0.3 percent in the second quarter.

There were large sectoral differences in the data, with labor productivity for durable goods firms jumping 3.8 percent in the second quarter and bouncing back from a 0.9 percent decline in the first quarter. Durable goods output was up 0.9 percent in the second quarter, with unit labor costs off by 0.8 percent. In contrast, labor productivity for nondurable goods manufacturers inched down by 0.1 percent in the second quarter, off from a 2.6 percent gain in the first quarter. Nondurable goods output rose 2.3 percent in the latest data, its best quarterly increase in just over four years, but this was offset by more hours worked. Unit labor costs for nondurable goods businesses increased by 1.2 percent. Read More

Manufacturing Job Openings Bounced Back in June; Nonfarm Postings at New All-Time High

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The Bureau of Labor Statistics reported that manufacturing job openings bounced back from 350,000 in May—its slowest pace so far this year—to 388,000 in June. That was the best number since March’s reading of 404,000, which was a 16-year high. In June, both durable (up from 201,000 to 214,000) and nondurable (up from 149,000 to 174,000) goods firms had more job postings. Openings in the sector have averaged 372,000 year to date in 2017, an improvement from the average of 342,000 for all of 2016. We would expect stronger job openings data moving forward, especially given recent improvements in the economic outlook for the sector, and this should lead to better hiring figures. Read More

NFIB: Small Business Optimism Index Rebounded in July to a Five-Month High

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The National Federation of Independent Business reported that the Small Business Optimism Index rebounded, up from 103.6 in June to 105.2 in July. The previous reading had been a post-election low—albeit one that still represented a highly positive outlook—and the new one was the highest since February. Overall confidence remained not far from January’s assessment (105.9), which was a 12-year high. To illustrate the boost in optimism across the past 12 months, the headline index stood at 94.6 one year ago. Along those lines, the percentage of respondents suggesting that the next three months would be a “good time to expand” increased from 21 percent to 23 percent. In July 2016, just 8 percent said the same thing. Read More

U.S. Trade Deficit Narrowed in June to Its Lowest Level Since October

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The Bureau of Economic Analysis and the Census Bureau reported that the U.S. trade deficit declined from $46.39 billion in May to $43.64 billion in June, its lowest level since October. In June, the reduced trade deficit was largely the result of an increase in goods exports (up from $127.26 billion to $129.01 billion) to a two-year high, with goods imports slipping a little (down from $194.65 billion to $194.25 billion). Meanwhile, the service-sector surplus also rose to its highest point since June 2015, up from $21.00 billion in May to $21.60 billion in June. Read More

Manufacturers Have Added 16,000 Jobs in July, Averaging 12,500 Workers per Month Since November

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The Bureau of Labor Statistics reported that manufacturers added 16,000 net new workers in July, extending the gain of 12,000 workers June. (June was estimated originally to be a gain of just 1,000 workers, and the May data were also revised from a decline of 2,000 to 0.) The July increase in manufacturing was the fastest since February, and the sector has now increased employment in seven of the past eight months. Over that eight-month span (since November), manufacturers have averaged 12,500 new jobs per month—definite improvement from the loss of 16,000 workers on net in 2016. In July, there were 12,425,000 manufacturing workers. At the same time, average weekly earnings for manufacturing workers rose from $1,086.30 in June to $1,092.03 in July, up 2.8 percent over the past 12 months from $1,062.02.

In another sign that manufacturing jobs are on the rise, Toyota announced today that it will build a $1.6 billion U.S. assembly plant to develop electronic vehicle technologies. The plant opening in 2021 will produce up to 300,000 vehicles per year and employ 4,000 manufacturing workers. Read More

New Factory Orders Soared in June due to Strong Aircraft Sales

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The Census Bureau said that new factory orders rose by 3.0 percent in June, up from $467.1 billion to $481.1 billion, rebounding from 0.3 percent declines in both April and May. This was the highest level since October 2014. Nonetheless, the bulk of that increase stemmed from a jump in nondefense aircraft and parts orders, up from $11.0 billion to $25.3 billion, likely centering around the International Paris Air Show. As a result, durable goods orders leapt 6.4 percent for the month, but edged up by just 0.1 percent with transportation equipment excluded. At the same time, nondurable goods orders were off by 0.3 percent in June, declining for the second straight month. Overall, new factory orders – which have struggled mightily over the past couple years – have largely trended in the right direction more recently, up 9.8 percent since June 2016. Excluding transportation, the gains were a still-healthy 6.9 percent year-over-year. Read More

ADP: Manufacturing Employment Declined in July for the First Time Since November

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ADP reported that manufacturing employment declined by 4,000 in July, declining for the first time since November. Overall, the sector has added 98,000 net new workers year-to-date. Despite the weaker data in this report, manufacturers have noted better employment growth this year than last, with employers accelerating their hiring in light of stronger activity and sentiment. In contrast, hiring in 2016 was flat for the year as a whole. With that in mind, we are hopeful that the trend of stronger job growth returns in the coming months.

Meanwhile, total private employment increased by 178,000 in July, pulling back somewhat from the 191,000 workers added in June but mostly in-line with consensus expectations. Nonfarm private payrolls have risen by 217,458 per month on average, which was notably higher than the 179,327 workers added each month in the second half of 2016. As such, the labor market has strengthened year-to-date, which is promising. The largest employment growth in July included professional and business services (up 65,000), education and health services (up 43,000), trade, transportation and utilities (up 24,000), leisure and hospitality (up 15,000) and financial activities (up 13,000). Small and medium-sized businesses (i.e., those with fewer than 500 employees) accounted for nearly three-quarters of all net new workers in July.   Read More

Manufacturing Construction Activity Slipped Further in June

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The Census Bureau reported that private manufacturing construction spending slipped further in June, down 1.9 percent. The value of construction put in place in the sector declined from $68.98 billion in May to $67.70 billion in June, its lowest level since September 2014. To further illustrate the recent deceleration in activity, construction spending in the sector averaged $69.92 billion in the first half of 2017, down from the average of $75.97 billion in the same time frame in 2016. While manufacturing construction has trended mostly higher over the past few years, activity moved lower since achieving the all-time high of $82.13 billion in May 2015. Nonetheless, we would continue to expect a turnaround in construction activity in the coming months, especially considering the improved outlook of late. Read More