The Federal Reserve said that manufacturing production expanded for the sixth consecutive month. Output in the sector was up 0.5 percent in February, mirroring the gain seen in January. These data continue to reflect an improving manufacturing sector, with activity turning a corner after struggling for much of the past two years from a number of economic headwinds. Indeed, manufacturing production has increased 1.2 percent over the past 12 months, up from 0.6 percent in the prior report. To put the recent progress in perspective, the year-over-year rate was -0.5 percent just six months ago. The year-over-year number was also the fastest pace since April 2015. Similarly, manufacturing capacity utilization rose from 75.3 percent to 75.6 percent, a 16-month high. Read More
The Bureau of Labor Statistics said that manufacturing job openings ticked higher, up from 342,000 in December to 364,000 in January, its highest level since July’s 15-year high (394,000). Job postings rose for both durable (up from 194,000 to 207,000) and nondurable (up from 148,000 to 157,000) goods firms. This report is encouraging from an openings standpoint, as elevated levels of postings should lead to better hiring numbers down the line.
For now, however, net hiring has remained weak. Total hiring edged up from 293,000 to 294,000 for the month, its fastest pace since October 2008. An increase in hiring for nondurable goods firms (up from 122,000 to 126,000) was just enough to offset fewer hires for durable goods manufacturers (down from 171,000 to 168,000). At the same time, total separations – which include quits, layoffs and retirements – increased from 287,000 to 301,000, an 11-month high. Separations were higher for both durable (up from 163,000 to 168,000) and nondurable (up from 124,000 to 132,000) goods businesses. Read More
The Federal Reserve Bank of Philadelphia said that manufacturing activity remained strong in March, even as headline growth pulled back from its strongest pace since November 1983. The composite index of general business activity decreased from 43.3 in February to 32.8 in March, which continued to be quite elevated. Despite the easing in the composite measure, many of the underlying data points expanded at a faster rate in March. This included new orders (up from 38.0 to 38.6), shipments (up from 28.6 to 32.9), employment (up from 11.1 to 17.5) and the average workweek (up from 13.6 to 18.5). Indeed, 53.4 percent of respondents said that sales were higher in March than in February, which should bode well for activity down the line. On the downside, faster growth appears to be leading to increased pricing pressures (up from 29.9 to 40.7), its highest level since May 2011. Read More
The Census Bureau and the U.S. Department of Housing and Urban Development reported that new housing starts rose 3.0 percent in February. More importantly, it has now exceeded 1.2 million for the fourth time in the past five months—a psychological threshold that we appear to have finally sustained. New residential construction activity increased from an annualized 1,251,000 in January to 1,288,000 in February, its highest level in four months. In addition, single-family housing starts jumped from 819,000 to 872,000, a pace not seen since October 2007. Yet, the multifamily segment, which is often quite volatile month to month, eased from 432,000 to 416,000.
On a year-over-year basis, new residential construction has risen 6.2 percent, up from 1,213,000 in February 2016. Single-family and multifamily activity was up 3.2 percent and 13.0 percent, respectively, over the past 12 months.
As expected, the Federal Open Market Committee (FOMC) voted to raise short-term interest rates by 25 basis points, upping them just three months after the last action. In doing so, the Federal Reserve noted better economic data and increased pricing pressures. Specifically, the statement cited a strengthening labor market, moderate growth in consumer spending and business investment that has “firmed somewhat.” While inflation is picking up, the FOMC predicts that prices “will stabilize around 2 percent over the medium term.” Nonetheless, it wants to stay ahead of such pressures while inflation is still at acceptable ranges. Hence, the Federal Reserve will continue its process toward normalized rates, and according to the latest economic projections, participants still see three rate hikes—or two more after this one—in 2017. Assuming those increases in the federal funds rate were also 25 basis points, the target range would be at 1.25 percent to 1.50 percent by year’s end (up from 0.75 percent to 1.00 percent after this action).
Of course, future Federal Reserve moves will hinge on incoming data, and more aggressive action might be necessary if the U.S. economy and/or inflation accelerate beyond current expectations. Along those lines, the economic forecasts did not change much from December. Participants see 2.1 percent growth on average in real GDP in 2017, with the unemployment rate falling to 4.5 percent. They also predict core inflation of 1.9 percent. Looking to 2018, FOMC members anticipate thee additional federal funds rate hikes, with real GDP growth of 2.1 percent once again. They forecast core inflation to be 2 percent.
Neel Kashkari, president of the Minneapolis Federal Reserve Bank, was the only dissenter. He preferred to keep short-term interest rates unchanged, at least for now.
The National Association of Home Builders (NAHB) and Wells Fargo reported that the Housing Market Index (HMI) rose to its highest level since June 2005. The HMI increased from 65 in February to 71 in March. Index values greater than 50 indicate strong builder confidence, with numbers greater than 70 suggesting very robust expectations for activity. Along those lines, NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas, said that “Builders are buoyed by President Trump’s actions on regulatory reform, particularly his recent executive order to rescind or revise the waters of the U.S. rule that impacts permitting.”
In this release, builders made healthy assessments about single-family home sales over the next six months. Mirroring the headline number, the index for expected sales increased from 73 to 78, matching the level seen in December. In the March data, sentiment was higher in every part of the country, including notable progress in the Northeast, which has struggled more than other regions.
The Census Bureau said that retail sales rose 0.1 percent in February, extending the upwardly revised 0.6 percent gain seen in January. (The prior month’s increase was originally reported to be 0.4 percent.) More importantly, it was the sixth consecutive monthly increase in retail spending, illustrating once again that Americans have been willing to open their pocketbooks after being more cautious with their purchases at this time last year. Indeed, over the past 12 months, retail sales have jumped 5.7 percent, off just slightly from January’s 6.0 percent year-over-year pace, which was the highest since March 2012. To put that figure in perspective, in February 2016, year-over-year growth was 3.5 percent, or 2.5 percent if motor vehicle sales were excluded. Read More
The Empire State Manufacturing Survey said that manufacturing activity continued to expand at a healthy pace, even as it pulled back in March from the fastest pace in 30 months in February. The composite index of general business conditions eased from 18.7 in February to 16.4 in March, expanding for the fifth straight month. In the latest data, there were signs that of notable improvements in activity in the district, including new orders (up from 13.5 to 21.3), employment (up from 2.0 to 8.8) and the average workweek (up from 4.1 to 15.0). The orders index was at its highest point since April 2011, with 39.4 percent of respondents indicating increased sales in March relative to February’s levels. Read More
The Bureau of Labor Statistics said that manufacturing employment rose for the third straight month, up by a healthy 28,000 in February. That was the strongest monthly growth in employment in 13 months and a definite sign of improvement given the cautious approach to hiring during much of last year. Manufacturers have added 57,000 workers in the past three months, with upward revisions totaling 13,000 for December and January. These numbers are consistent with increased demand, production and sentiment in the past few months in the sector. Indeed, manufacturers are more optimistic in their economic outlook and significantly less cautious about hiring than this time last year. This view is further supported by a belief that the new administration will help to usher in pro-growth policies that will accelerate activity in the U.S. economy and help to improve overall global competitiveness.
A strengthening labor market will also all but guarantee that the Federal Reserve will raise short-term interest rates at this week’s meeting—something that it has already implied. Along those lines, nonfarm payrolls increased by 235,000 in February, which was better than the consensus estimate of around 200,000, and the unemployment rate edged lower, down from 4.8 percent to 4.7 percent. In addition, the participation rate ticked up from 62.9 percent to 63.0 percent, its highest level since March 2016 and definite progress from 62.6 percent just four months ago. The so-called “real” unemployment rate, which includes those marginally attached to the workforce and those who are working part time for economic reasons, fell from 9.4 percent to 9.2 percent. That matched the level in December, which had been the lowest since April 2008. Read More
National Association of Manufacturers (NAM) President and CEO Jay Timmons issued the following statement on the February jobs numbers issued by the Bureau of Labor Statistics today:
“Today’s news is another strong indicator of the ‘Trump bump’ of positive economic activity. Across America, manufacturers’ confidence is high, and business optimism continues to soar, because of President Donald Trump’s laser focus on policies that will accelerate a jobs surge in America. To keep the momentum going, manufacturers have the solutions: regulatory reform, infrastructure investment and bold tax reform. We are ready to work with the president, Congress and anyone who cares about the manufacturing economy to get those priorities across the finish line and raise the standard of living of all Americans.”
Learn more about the NAM’s agenda for increasing manufacturing competitiveness and growing jobs here.