Today’s durable goods numbers from the Census Bureau were disappointing. New orders for durable goods fell 4 percent in January, with declines in a number of major sectors. Keeping it all in perspective, though, new orders rose 4.2 percent and 3.2 percent in November and December, and the $206.1 billion in new orders in January still outpaces the levels from October. New orders remain 8.8 percent higher than in January 2011.

A number of major sectors experienced declines in January for new orders. These were led by the transportation sector (down 6.1 percent), with decreases in both defense and nondefense aerospace orders for the month. (Nondefense aerospace figures are highly volatile due to the timing of when orders come in for new planes, and there was a large spike in sales in December.) Excluding transportation, new orders fell by 3.2 percent.

Other sectors with losses include machinery, primary metals, electrical equipment and computers. Nondefense capital goods fell 6.3 percent, reversing the 9.3 percent and 6.8 percent gains in the prior two months.

Meanwhile, shipments of durable goods rose 0.4 percent, below the 1.9 percent increase of December. Among shipments, the transportation sector did the strongest, up 5.4 percent, with strong gains in the aerospace sectors and for motor vehicles. Excluding transportation, shipments fell by 1.1 percent. Declines in machinery, computers and capital goods helped to drive this number lower in January.

Unfilled orders and inventories grew 0.5 percent and 0.7 percent, respectively, in January, continuing a long streak for both of them.

While other reports that show improvements in the economy, these findings offer a countervailing viewpoint. January new durable goods orders were much weaker than analysts had expected and differ greatly with surveys showing rising levels of production. As noted earlier, the overall trend remains a positive one, but this bump in the road was both unexpected and potentially worrisome if it is the beginning of a new trend. The optimist in me, though, suggests that January’s declines were simply a leveling off of the large gains experienced in November and December.

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau reported higher housing starts figures in January, up to 699,000 from a revised 689,000 in December. This increase stemmed from multi-family home construction, which rose from 176,000 to 191,000. Single-family new starts fell from 513,000 to 508,000 for the month, and the number of completions fell sharply. On the bright side, housing permits for single family residences were up slightly — a sign of progress moving forward.

Note that many of the data points for 2011 were revised upward. Overall starts in November, for instance, topped 700,000 for the first time since October 2008. These figures clearly show an upward trajectory, with total housing starts up nearly 10 percent year-over-year. Regionally, gains in the South and West were somewhat offset by less new residential construction in the Northeast and Midwest. For January, though, only the Midwest had declines.

This news mirrors similar data released yesterday by the National Association of Home Builders (NAHB). Its housing market index rose from 25 to 29. This represents a significant improvement in builder confidence in the past few months as the index was 14 in September. Single-family sales rose, and expectations are higher for the next six months.

NAHB Chief Economist David Crowe trumpets the positive trend, but he also cautions us to keep the numbers in perspective. “… it is important to remember that the HMI is still very low, and several factors continue to constrain the market. Foreclosures are still competing with new home sales, and many builders are seeing appraisals come in at less than the cost of construction. Additionally, prospective home buyers are finding it difficult to qualify for a mortgage.”

In other news today, the Philadelphia Federal Reserve Bank reports continued improvements in manufacturing activity in its region. The index of general business conditions rose from 7.3 in January to 10.2 in February. This is the fifth consecutive month of expanding production, with higher measures for new orders, shipments and the average workweek. The rate of job growth eased, though, and inventories were shrinking. (The latter is a positive sign of the increased activity.) Pricing pressures accelerated.

Looking ahead six months, the respondents remained very positive about future activity, but less so than last month. The expectations index of general activity fell from 49.0 to 33.3. This coincided with lower values for new orders, shipments and capital spending plans. But, employment measures were stronger, suggesting an increased willingness to hire additional workers in the coming months. I would not overplay the news that this figure declined by too much, however, as it mostly reflects a settling in of the overall improving trend. Only 12.9 percent of those taking the survey expect for activity to decline in the next few months.

Overall, the numbers released today and yesterday highlight a recovering economy, with manufacturing leading the way. Improvements in housing are also a welcome sign, even as the sector remains below its historical averages.

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau reported that retail sales grew by 0.1 percent in December, their slowest pace since May. This suggests that holiday sales – despite strong Black Friday and Christmas week sales – were weaker than many might have preferred. In fact, if you were to exclude auto sales, retail sales would have fallen 0.2 percent. Nonetheless, retail sales in 2011 were 7.7 percent higher than in 2010.

Areas of strong growth in December included building materials (up 1.6 percent), motor vehicle and parts (up 1.5 percent), furniture and home furnishings (up 1 percent), clothing and accessories (up 0.7 percent) and food service and drinking places (up 0.7 percent). These were offset, though, by declines in electronics and appliances (down 3.9 percent), gasoline stations (down 1.6 percent due to lower petroleum prices) and general merchandisers (down 0.8 percent).

These numbers suggest that Americans continue to be cautious in their spending despite rising confidence and improving labor market conditions. Still, it also shows the public willing to open up its pocketbook selectively on big-ticket items such as automobiles and home improvement. Non-store retailers (up 10.6 percent) experienced the fastest year-over-year growth in retail sales; this was followed by auto dealers (up 9.5 percent), with clothing, building materials and furnishings doing well, too.

Meanwhile, the Census Bureau also released business inventory data for November, with manufacturers experiencing a 0.5 percent increase in inventories for the month. This represents a slower pace than the 0.9 percent growth rate of October. Manufacturers’ sales were unchanged in November, with the inventory-to-sales ratio edging slightly higher to 1.34 from 1.33. Overall, though, businesses have done an excellent job of inventory control of late.

For the larger economy, both sales and inventories were up 0.3 percent in November. The motor vehicle sector had the largest increase in inventories, up 0.6 percent.

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau reported that housing starts jumped from 627,000 in October to 685,000 residential units in November. Both single-family and multi-family units were higher, but multi-family starts increased the most. New multi-family residential construction rose from 190,000 to 238,000 for the month, its highest level since autumn of 2008. Meanwhile, single-family construction grew to 447,000 from 437,000 the previous month.

Regionally, only the Midwest is experiencing slower housing starts. The Northeast and West had the fastest monthly growth in new residential construction, with the South also higher.

Housing permits were also higher, up to 681,000 from 644,000, largely on strength in the multi-family residential sector. This bodes well for new construction moving into 2012. Total completions – a lagging indicator – fell 5.6 percent in November to 542,000 units.

Overall, these numbers are positive news to end the year on. The National Association of Home Builders released similarly upbeat news yesterday. A stronger housing market will be vital to the long-term health of the manufacturing sector and the overall economy, and recent data have tended to show the sector in edging higher. Given continuing weaknesses in the housing market and headwinds elsewhere, it is clear that there is still a long way to go, though.  

Chad Moutray is chief economist, National Association of Manufacturers.

The Census Bureau stated that retail sales fell 0.2 percent in May, its first decline since June 2010. The largest decliner was motor vehicle and parts sales, which dropped 2.9 percent from the previous month. Excluding autos, retail sales rose 0.3 percent. Even with these declines, however, it is important to note that retail sales were up 7.7 percent since May 2010, with auto sales up 5.4 percent over the past year.

Consumers continue to be pinched by rising prices. (Note that the consumer price index data for May will be released tomorrow.)  As a result, the weakness in spending went beyond automobiles. Other sectors with declining sales in May were electronics and appliances (down 1.3 percent), furniture and home furnishings (down 0.7 percent), food and beverages (down 0.5 percent), sporting goods and hobbies (down 0.4 percent), and general merchandisers (down 0.1 percent).

Bucking this trend, though, was strong growth in sales from nonstore retailers and building supply stores (both up 1.2 percent). Reflecting upward movement in energy prices, gasoline stations experienced a 0.3 percent increase in sales in May and a 22.3 percent rise year-over-year.

A second report released today shows that small businesses remain pessimistic about the economy – definitely not a good sign. The National Federation of Independent Business (NFIB) reported that its Small Business Optimism Index fell from 91.2 in April to 90.9 in May.

This was the third consecutive month of declines, with the index standing at 94.5 in February. Figures under 100 usually indicate weakness in the small business sector, and respondents appear to be hesitant to expand their businesses, hire new workers, and invest in new capital. The top concern remains poor sales, but perhaps reflecting inflationary pressures, 31 percent of respondents indicated the need to raise prices.

Overall, these two economic indicators reinforce the notion that the economy has weakened somewhat in the second quarter of 2011. Rising energy, food, and raw material prices continue to take their toll, but there are also other headwinds, both temporary and otherwise, which are serving as a drag on the economy. The NFIB survey is more pessimistic than other surveys, including ours, and there I remain cautiously optimistic about manufacturing output in the second half of 2011. 

Yet, these numbers are enough to remind us that economic growth remains tenuous, and for the manufacturing sector to continue to grow, we need to have the right economic and policy environment.

Chad Moutray is chief economist, National Association of Manufacturers.

This morning the Census Bureau released the report on April’s manufacturers’ shipments, inventories and orders. The report shows more evidence, on top of what we saw yesterday, that manufacturing has cooled in the past few months.

Below are some of the key numbers from the report:

• New orders of manufactured goods decreased $5.5 billion or 1.2 percent to $440.5 billion.
• Excluding transportation new orders decreased 0.2 percent.
• Shipments were down $0.9 billion or 0.2 percent to $444.5 billion.
• Unfilled orders increased $2.5 billion or 0.3 percent.
• Inventories increased just $7.7 billion or 1.3 percent to $587.8 billion.

From the U.S. Census:

Real median household income in the United States climbed 1.3 percent between 2006 and 2007, reaching $50,233, according to a report released today by the U.S. Census Bureau. This is the third annual increase in real median household income.

Meanwhile, the nation’s official poverty rate in 2007 was 12.5 percent, not statistically different from 2006. There were 37.3 million people in poverty in 2007, up from 36.5 million in 2006. The number of people without health insurance coverage declined from 47 million (15.8 percent) in 2006 to 45.7 million (15.3 percent) in 2007.*

These findings are contained in the report Income, Poverty, and Health Insurance Coverage in the United States: 2007 [PDF].

Oh, man. What next? Workplace fatalities reach record low?

* The first annual decline in seven years, HealthDay News reports.