BLS Report: Another Touchdown for Manufacturers

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The Bureau of Labor Statistics reported that manufacturing ran up the score for the second straight month in January began the new year on an encouraging note. The sector added 5,000 workers in January, building on a gain of 11,000 workers in December.

We hope this is a sign that manufacturers are starting to accelerate their hiring in light of a stronger demand and production outlook. Today’s report stands in contrast to the numbers throughout much of 2016. Last year, manufacturers were taking a more cautious approach, and as a result there are 46,000 fewer manufacturing workers today than one year ago, as global headwinds and economic uncertainties continued to take their toll on manufacturing activity. Read More

productivity

Manufacturing Productivity Rebounded Somewhat in the Fourth Quarter but Remained Soft in 2016

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The Bureau of Labor Statistics said that manufacturing labor productivity rebounded somewhat in the fourth quarter after being flat in the third quarter. Output per worker in the sector increased 0.7 percent in the fourth quarter, continuing a trend of soft productivity growth since the Great Recession. Indeed, manufacturing labor productivity averaged just 0.3 percent from 2013 to 2016. In comparison, output per worker in the sector averaged a more robust 5.2 percent annually from 2002 to 2008. Over a longer term, manufacturers have benefited from being leaner in recent years, but the recent sluggishness in productivity and output growth have meant that unit labor costs have risen 11.3 percent since the end of 2011. Read More

construction

Manufacturing Construction Fell to a Two-Year Low in December

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The Census Bureau said that private manufacturing construction spending remained weak in December, falling to a two-year low. The value of construction put in place in the sector declined from $70.54 billion in November to $68.10 billion in December, down 3.5 percent for the month. While manufacturing construction has largely trended higher over the past few years, activity has stalled more recently as the sector has grappled with sluggish growth and economic and political anxieties. Along those lines, construction activity in the manufacturing sector has pulled sharply lower since achieving the all-time high of $82.15 billion in September 2015. Over the past 12 months, manufacturing construction spending has fallen 5.9 percent. Read More

ism

ISM: Manufacturing Activity Continued to Grow Rather Strongly in January

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The Institute for Supply Management’s (ISM) Manufacturing PMI continued to grow rather strongly, accelerating to its fastest pace since November 2014. The composite index rose from 54.5 in December to 56.0 in January, and it marked the fifth straight monthly expansion in the headline number. New orders (up from 60.3 to 60.4) and production (up from 59.4 to 61.4) expanded strongly in January. Along those lines, the sample comments all point to healthier conditions and stronger demand in the manufacturing sector, which is very encouraging. In addition, employment also picked up the pace (up from 52.8 to 56.1), suggesting that manufacturers have begun to move past the more cautious approach to hiring seen just a few months ago. Read More

ADP: Manufacturing Hiring Picked Up in January

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ADP said that manufacturing employment growth picked up in January, with the sector hiring 15,000 workers for the month on net. It marked the fourth time in the past five months that manufacturers added workers, but firms in the sector lost 39,000 workers in 2016, according to ADP. (The Bureau of Labor Statistics has said that manufacturing employment declined by 45,000 workers last year in official data.) Manufacturers had been wary about adding to their workforces over much of the past year due to global headwinds and economic uncertainties. Hopefully, this latest release is the start of things turning around as we begin 2017 with improved signs of activity and business confidence. Indeed, job openings have remained elevated in recent months, suggesting that manufacturers are prepared to accelerate hiring and be less cautious with better demand and production figures. Read More

Conference Board: Consumer Confidence Pulled Back a Little but Remained Elevated

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Consumer confidence pulled back a little in January after soaring to a 15-year high in December in the aftermath of the election, but it remained elevated. The Consumer Confidence Index declined from 113.3 in December, its highest level since August 2001, to 111.8 in January. This continued to represent a mostly positive assessment of the economy relative to perceptions just a few months ago. For instance, the index stood at 96.7 just six months ago. Americans’ view of current conditions (up from 123.5 to 129.7) improved in January. Whereas, the easing in the headline number mirrored somewhat reduced opinions about the future (down from 106.4 to 99.8). Note that the future expectations measure has also trended higher despite slipping in January, as it was 82.0 just six months ago. Read More

regional fed

Dallas Fed: Manufacturing Sentiment Expanded in January at Fastest Rate Since April 2010

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The Dallas Federal Reserve Bank reported that manufacturing activity expanded in January at its fastest rate since April 2010. The composite index of general business conditions increased from 17.7 in December to 22.1 in January, expanding for the fourth consecutive month after contracting for 21 straight months. The recent gains in business confidence can largely be attributed to better energy commodity prices and from a post-election boost in optimism, especially as it relates to expectations regarding pro-growth policies. Along those lines, key measures of activity were mostly higher in January, including new orders (up from 10.1 to 15.7), shipments (up from 5.8 to 15.8), employment (up from -3.4 to 6.1), hours worked (up from 3.1 to 9.1) and capital expenditures (up from 6.7 to 16.3). In addition, production (down from 14.8 to 11.9) and capacity utilization (down from 15.6 to 9.1) have also notched improvements in recent months despite some easing in the latest data.

Moving forward, manufacturing leaders were very positive about the next six months. The forward-looking measure jumped from 42.5 to 43.7, a level not seen in just over 12 years (December 2004). Indeed, nearly 62 percent of respondents expect increased levels of production and new orders in the months ahead, with 46.4 percent and 35.2 percent predicting higher employment and capital spending, respectively.

durable goods

Reduced Transportation Equipment Sales Pushed Durable Goods Orders Lower in December

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The Census Bureau said that new durable goods orders declined 0.4 percent in December. New orders decreased from $228.0 billion in November to $227.0 billion in December. However, these data have been skewed by volatility in the transportation equipment segment. Defense aircraft and parts orders plummeted 63.9 percent in December after soaring by 99.1 percent in November. Excluding transportation, new orders for durable goods were up 0.5 percent, rising from $152.6 billion to $153.4 billion, its fastest pace since October 2014. In general, these data reflect better performance after the sector has struggled mightily over the past two years on global challenges. On a year-over-year basis, new durable goods orders have risen 1.6 percent, with 3.5 percent growth since December 2015 excluding transportation equipment. Read More

GDP

Fourth Quarter Real GDP Growth at 1.9 Percent

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The Bureau of Economic Analysis said that the U.S. economy grew 1.9 percent at the annual rate in the fourth quarter in preliminary data. This was slightly less than the consensus estimate for 2.2 percent, and it was slower than the 3.5 percent increase seen in the third quarter. Real GDP growth was buoyed by modest growth in consumer and government spending and by a continuing rebound in business investment, but net exports served as a drag on the headline number. Overall, the U.S. economy expanded 1.6 percent in 2016, down from its 2.2 percent post-recessionary average, and the year was mostly marked by an all-too-cautious approach to spending on the part of consumers and business leaders. Yet, by year’s end, that began to change – with many Americans and firms more willing to open their pocketbooks. Moving forward, I would expect 2.6 percent growth in real GDP in 2017 – a figure that can be assisted by pro-growth policies emanating from Washington including comprehensive tax reform, regulatory balance and investment in infrastructure.

Looking more closely at the underlying data, consumer spending on goods increased 5.2 percent at the annual rate in the fourth quarter, building on the 3.5 percent gain seen in the third quarter. This figure was boosted by strength in durable goods purchases including motor vehicles. Personal consumption expenditures added 1.70 percentage points to real GDP in the fourth quarter, with 0.58 percent coming from services and 1.11 percent stemming from goods spending.

Healthier business spending also served to boost real GDP growth, with gross private domestic investment adding 1.67 percentage points to the top line. It was the largest contribution to the real GDP since the second quarter of 2014. Residential and nonresidential fixed investment rose 10.2 percent and 2.4 percent in the fourth quarter, respectively, with both notching notable improvements from the third quarter. Indeed, residential spending rebounded from a sharp decline in the prior report, and equipment spending rose for the first time in five quarters. Inventories were also up significantly for the second straight quarter, accounting for a full percentage point of the 1.67 percent contribution in this category. Yet, it was not all good news, as nonresidential fixed investment in structures fell 5.0 percent in the fourth quarter.

Finally, manufacturers have been challenged over much of the past two years by a number of global headwinds. This has included a rapid appreciation in the U.S. dollar, as well as economic softness to many key markets. Along those lines, the contribution to GDP from net exports slipped back into negative territory in the fourth quarter for the first time in 2016, subtracting 1.70 percentage points to the headline number. (Put another way, if it had not been for net exports, real GDP growth in the fourth quarter would have been 3.6 percent, not 1.9 percent.) Goods imports jumped 10.9 percent in this release, with goods exports off by 6.9 percent.

Richmond Fed: Manufacturers Continued to Expand Modestly in January

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The Richmond Federal Reserve Bank said that manufacturing activity in its district continued to expand modestly in January. The composite index of general business activity increased from 8 in December to 12 to January. That was the fastest pace of growth since March, representing the third straight monthly expansion in the mid-Atlantic region. Indeed, new orders (up from 11 to 15) and shipments (up from 12 to 13) each accelerated somewhat in the latest survey, with employment (up from -1 to 8) returning to positive growth in January after slipping a little in December. At the same time, capacity utilization (down from 10 to 8) and the average workweek (down from 11 to 5) slowed a bit in the latest report, even experienced decent growth. Read More