Tag: conference board

Leading Economic Indicators Increased at Fastest Pace in Four Months

The Conference Board said that the Leading Economic Index (LEI) rose 0.8 percent in March, extending the 0.5 percent gain observed in February. It was the fastest pace since November, and more than anything, it suggests that the U.S. economy has begun to move beyond the weather-related softness of December and January. This rebound was most notable in the variable for the average workweek of production workers, which added 0.26 percentage points to headline figure and offset declines from December to February. Yet, new manufacturing data were somewhat mixed, but a small positive on net.

Other positive contributors to the LEI included favorable credit conditions, initial jobless claims, the stock market, and the interest rate spread. At the same time, building permits and consumer confidence provided small drags to the LEI.

Meanwhile, the Coincident Economic Index (CEI), which assesses current conditions, was up 0.2 percent in March. It was the second straight monthly increase, down from 0.4 percent in February. All four components were higher for the month. This included industrial production, which rose 0.7 percent in March and added 0.11 percentage points to the CEI. Other contributors which added to the CEI were nonfarm payrolls, personal income, and manufacturing and trade sales.

In general, the Conference Board’s report is good news for the economy over the coming months, with the rebound a sign of strength moving forward.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Conference Board: Consumer Confidence Rose in March to a Six-Year High, but with Continued Anxieties

The Conference Board said that consumer sentiment rose to a six-year high. The Consumer Confidence Index increased from 78.3 in February to 82.3 in March, its highest point since January 2008. To be fair, it was not far from the 82.1 registered in June of last year before slowing in the autumn months, bottoming out at 72.0 in November in the aftermath of the government shutdown debate.

Despite the higher overall figure, the underlying data were mixed. The increase in the Consumer Confidence Index stemmed entirely from the bump-up in individuals’ outlook for the future. The expectations component increased from 76.5 to 83.5 for the month, suggesting that Americans were becoming more upbeat about the future economy. Still, this measure was below the stronger levels of optimism seen last summer, with this figure down from 89.0 in August.

In terms of the current economic climate, the index for present conditions ebbed slightly, down from 81.0 to 80.4. The longer-term trend, however, remains positive, with the index up from 70.9 in August.

Continued anxieties about the labor market were behind the reduced data for the current economy. The percentage of respondents saying that jobs were “plentiful” decreased from 13.4 percent to 13.1 percent, and at the same time, those suggesting that jobs were “hard to get” also increased from 32.4 percent to 33.0 percent. These worries carried through to income concerns, with those anticipating higher incomes in the months ahead falling from 15.8 percent to 14.9 percent. Fortunately, fewer people also predicted reductions in income, down from 13.4 percent to 12.1 percent.

Therefore, even as the headline figure reached an all-time high, it remains clear that Americans continue to be uncertain about the economy. Buying intentions were also lower for automobiles (down from 13.8 percent to 12.6 percent) and homes (down from 5.7 percent to 5.4 percent). The percentage planning to purchase new appliances, on the other hand, rose from 47.9 percent to 49.7 percent.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Conference Board: Consumer Confidence Was Higher in January

The Conference Board said that consumer confidence has returned to where it was before the partial government shutdown. The Consumer Confidence Index increased for the second straight month, up from a revised 77.5 in December to 80.7 in January. This was the highest sentiment since August (81.8), and it mirrored a similar rebound in the preliminary data from the University of Michigan and Thomson Reuters (which will release final data for January on Friday).

Over the course of 2013, the public generally became more confident. For instance, in the aftermath of the fiscal cliff debate, the Conference Board’s measure was 58.4, suggesting an increase of 22.3 points in the past 12 months.

The increase in perceptions in January resulted from improved views about current and future economic conditions. Yet, Americans still have concerns about the labor market, with nearly one-third of survey respondents saying that jobs were “hard to get.” At the same time, more of those taking the survey anticipated higher incomes than in the last report.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – December 2, 2013

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

The data released last week were mostly positive regarding improvements in the economy. For instance, manufacturing activity has largely picked up since the summer, an acceleration that is welcome after softness over the past year or so. Reports from the Chicago, Dallas and Richmond Federal Reserve Banks support this, with stronger paces for new orders and production in each region. This is especially true when you look at the mostly positive assessments of future sales and output, with large percentages of survey respondents anticipating rising activity levels. The good news extends to better—although still modest at best—hiring plans. The pickup in the manufacturing sector has also been one of the positive factors helping the Conference Board’s Leading Economic Index (LEI) expand for four straight months, an encouraging sign for the economy for the coming months.

Yet, even among these promising reports, there were signs of continuing softness for the sector. In the Dallas Federal Reserve survey, respondents were more upbeat about their own company’s outlook than they were about the larger macroeconomy. In fact, the index for perceptions about the economy as a whole declined from 3.6 to 1.9, with 65.0 percent of respondents not expecting macroeconomic conditions to improve over the next six months. In addition, the data on new durable goods orders found broad-based softness in the sector in contrast to the various sentiment surveys. Declines in October sales went beyond the decrease in aircraft orders. Moreover, while new durable goods orders have risen 5.3 percent since October 2012, year-to-date growth in durable goods orders—excluding the highly volatile transportation sector—has increased just 0.9 percent.

Similarly, the latest housing market data were also somewhat mixed. New housing permits in October soared to more than 1 million annualized units for the first time since April. To the extent that permits serve as a proxy for future residential construction activity, this was an encouraging development. Yet, the ascent in the permitting data came entirely from multifamily units, with single-family home permits essentially stalled. Higher mortgage rates have been a factor in dampening current demand for new construction; however, the average 30-year mortgage rate of 4.29 percent last week was better than early September’s 4.57 percent. Meanwhile, new housing starts data were delayed until the December 18 release due to the government shutdown, somewhat hampering our ability to analyze the housing market beyond permits.

By now, the holiday shopping season is in high gear. We will need to wait for final numbers on whether retail spending increased over last year, although the National Retail Federation reported mixed results despite deep discounting over the Thanksgiving holiday weekend. We also need to closely look at consumer confidence, particularly in determining how willing Americans will be to open their wallets. The two measures of consumer sentiment released last week moved in opposite directions, providing a bit of confusion regarding current attitudes. The Conference Board’s consumer confidence data fell again in November, with respondents suggesting reduced buying intentions. October’s budget impasse was not helpful, but overall sentiment has been lower since June. In contrast, the University of Michigan and Thomson Reuters surprised many with a better-than-expected final reading of its consumer sentiment index, improving from the preliminary report released just two weeks prior. Despite the recent gain, however, this report remains below the six-year high achieved in the summer.

This week will be a very busy one on the economic front. Later this morning, we will learn more about the strength of the pickup in manufacturing activity in the Institute for Supply Management’s Purchasing Managers’ Index, and on Wednesday, new international trade figures will show whether improving economies in many of our major trading partners will increase our exports. In addition, the bigger headlines will come on Thursday and Friday with a revision to third-quarter real GDP and the jobs report for November. Other highlights will be the Federal Reserve’s Beige Book and new releases on construction spending, factory orders, personal income and vehicle sales.

Chad Moutray is the chief economist, National Association of Manufacturers.

midwest manufacturing index - dec2013

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Leading Economic Indicators Rose in October for the Fourth Straight Month

The Conference Board said that the Leading Economic Index (LEI) rose 0.2 percent in October, the fourth straight month of gains. The main drivers of the increase in October were increased building permits, a rising stock market, favorable credit conditions, and the interest rate spread. Manufacturing activity provided a modest contribution to the monthly increase with continuing strength in new orders. There were also factors that weakened the LEI in October, including reduced consumer confidence and increases in average weekly unemployment claims.

Putting this data in perspective, Ken Goldstein, an economist with the Conference Board, said, “Overall, the data reflect strengthening conditions in the underlying economy. However, headwinds still persist from the labor market, accompanied by business caution and concern about federal budget battles. The biggest challenge to date has been relatively weak consumer demand, which continues to be restrained by weak wage growth and slumping confidence.”

Meanwhile, the Coincident Economic Index (CEI), which assesses current economic conditions, also rose by 0.2 percent in October. It was the third consecutive monthly increase, building on the 0.3 percent gain of September. The CEI had positive contributions from growth in nonfarm payrolls, personal income, and manufacturing and trade sales. With that said, industrial production, which was off 0.1 percent in October, subtracted a little from the CEI. Note that decreased output stemmed largely from weaknesses in the mining and utilities sectors, with manufacturing production up 0.3 percent.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Conference Board: Consumer Confidence Was Off Again in November

The Conference Board said that consumer confidence was off again in November, down from 72.4 in October to 70.4 in November. Sentiment had increased earlier in the year, rising from 58.4 in January to 82.1 in June. The June reading had been the highest level observed since January 2008. Since then, however, Americans have become less confident in the economy, with the government shutdown exacerbating that. We have seen a similar decline in optimism in the similar report from the University of Michigan and Thomson Reuters.

The largest decrease in sentiment in the Conference Board report came from weakened perceptions about the future economy. The expectations component has dropped from 91.1 in June to 69.3 in November, explaining much of the decline in the overall index.

At the same time, the index for current economic conditions has mostly languished over the past six months, ranging from 68.7 in June to 73.5 in September. The November reading for current conditions was 72.0, indicating a slight dropout in views about the present economy since September.

As usual, these data tend to move on expected income and labor market issues. In this case, the percentage of respondents saying that business conditions were “bad” rose from 23.0 percent to 25.2 percent, somewhat offsetting the improvement in those saying conditions were “good” (up from 19.5 percent to 19.9 percent). Likewise, over one-third of those taking the survey continue to suggest that jobs are hard to get, and the percentage expecting higher incomes in the coming months dropped from 15.7 percent to 14.9 percent.

The reduction in consumer confidence also weighed heavily on buying intentions. The percentage of respondents planning to purchase a home (down from 5.5 percent to 5.0 percent), automobile (down from 11.9 percent to 11.5 percent), or appliance (down from 50.5 percent to 45.4 percent) were all lower. As such, this survey responses stand in contrast to the more-positive retail sales numbers released last week for October.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – November 12, 2013

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

The U.S. economy has been increasing a bit faster than expected, with real GDP up a surprisingly strong 2.8 percent in the third quarter. This was higher than consensus estimates of around 2.0 percent. In general, the data observed that many of the second-quarter trends extended into the third quarter, particularly with modest growth in consumer and business spending. In fact, goods spending grew an annualized 4.3 percent in the third quarter, contributing 0.99 percentage points to overall real GDP. Fixed investment was a positive contributor overall, but the largest component was inventory replenishment. Without inventory spending, real GDP would have been closer to the forecasted 2.0 percent. Other positives included stronger growth in exports and improved local and state government performance. While the data pre-dated the government shutdown, reduced federal government spending was once again a drag on growth, something that will continue moving into the fourth quarter.

October’s jobs numbers were also surprisingly strong. It was widely expected that the employment data from the Bureau of Labor Statistics were going to be closer to what ADP had estimated the week before, with roughly 130,000 additional workers added in the month. Instead, nonfarm payrolls increased by 204,000 in October, and when combined with significant revisions to August and September data, the average over the past three months is 201,667. This suggests hiring has picked up more recently in the larger economy, mirroring improvements in other data. However, the unemployment rate edged up slightly from 7.2 percent to 7.3 percent. This corresponded with the participation rate moving up a bit from 63.2 percent to 63.8 percent, suggesting that some workers might be returning to the market.

Manufacturers hired an additional 19,000 workers on net in October, its fastest pace since February. Both durable and nondurable goods firms brought on additional employees, up 12,000 and 7,000, respectively, for the month, and the largest increase occurred in the motor vehicle sector, which added another 5,700 workers. While this was better than recent figures, hiring growth for the sector has been disappointing. On a year-over-year basis, manufacturers have added 55,000 additional workers, or 2.4 percent of the 2.3 million nonfarm payroll workers added over the past 12 months.

Other data released last week also highlighted the recent acceleration in manufacturing activity. The JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) increased from 51.8 in September to 52.1 in October, its fastest pace since May 2011. Stabilization in Asia and Europe has helped to raise the level of new orders and output in many of our key trading partners, with modest growth in October. (For more information on these trends, see the latest Global Manufacturing Economic Update, which was released on Friday.) Increases in manufacturing sales helped lift the Conference Board’s Leading Economic Index (LEI) higher as well. For instance, new manufactured goods orders jumped 1.7 percent in September. Nonetheless, aircraft orders were the main driver of new factory orders, with weaknesses in the broader market.

Meanwhile, consumer confidence continued to fall in preliminary survey data from the University of Michigan and Thomson Reuters. Since reaching a six-year high in July, the confidence measure has fallen from 85.1 to 72.0. The government shutdown dampened overall sentiment, but attitudes were already waning before that. To some extent, the diminished enthusiasm about the current and future economic environment might have impacted Americans’ purchasing decisions. The latest personal spending report suggests individuals might be more hesitant about opening their pocketbooks, with only modest growth in purchases in recent months. Consumer spending fell in the third quarter, down from a year-over-year pace of 3.3 percent in June to 2.7 percent in September. Durable goods spending declined 1.3 percent in September, bringing down the total figure. Interestingly, this slowdown in spending has corresponded with relatively strong personal income growth, up an annualized 4.45 percent in the third quarter. As a result, the savings rate increased to 4.9 percent, its highest level so far in 2013.

This week, the focus will be on price, production and trade data. Prices have been increasing minimally, with core inflation running below 2 percent. That should continue to be true with the release of October consumer and producer pricing data on Thursday and Friday. Improvements in the global economy should lead to better export figures, and manufacturing production should also be up modestly, building on recent gains. Other highlights will be the latest regional manufacturing survey from the New York Federal Reserve Board and new reports on labor productivity and small business optimism.

Chad Moutray is the chief economist, National Association of Manufacturers.

real GDP forecast - nov2013

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Conference Board: Government Shutdown Reduced Consumer Confidence

The Conference Board said that consumer confidence fell sharply, down from 80.2 in September to 71.2 in October. This was the lowest index level since April’s 69.0 reading, essentially wiping out much of the gains this year. (Consumer confidence began the year in the aftermath of the fiscal cliff debate with a 58.4 reading in January.) As such, these findings closely mirror consumer sentiment data from the University of Michigan and Thomson Reuters, which was released last week. In both instances, the federal budget impasse frustrated many Americans, resulting in lower confidence.

In the Conference Board report, the largest decline occurred in the perceptions about the future. The expectations component has declined from 89.0 in August to 84.7 in September to 71.5 in October. This was the lowest level of expectations since March.

As usual, these types of indices tend to move on pocketbook issues. In this case, an increased number of respondents said that “jobs were hard to get” (up from 33.6 percent in September to 35.8 percent in October). At the same time, those anticipating their income to decrease rose from 13.9 percent to 15.4 percent.

The importance of this data is the impact on buying intentions. Unfortunately, the percentage of respondents planning to purchase a home (down from 6.5 percent to 5.9 percent) or automobile (down from 12.9 percent to 11.8 percent) fell for the month. However, the percentage of consumers planning to purchase an appliance rose from 48.8 percent to 50.4 percent, suggesting that not all elements were moving lower.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – September 30, 2013

Here is a summary of this week’s Monday Economic Report:

Increases in consumer spending and business investment in the second quarter boosted the economy, with the government announcing real GDP growth of 2.5 percent last week in its latest revision. This did not change from its previous estimate. Nonetheless, even with modest gains in the second quarter, the United States has grown too slowly in the first half of 2013, up just 1.8 percent. There have been some indications that manufacturing activity and other data have accelerated recently. Surveys show that manufacturers are generally positive about higher orders and production moving forward. Yet, it is also clear that persistent headwinds have prevented even faster economic growth. I anticipate real GDP growth of 2.0 percent for the third quarter.

While manufacturing activity has accelerated of late from weaknesses seen in the spring and early summer, data released last week showed some easing in new orders and the overall pace of growth. The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) declined slightly from 53.1 in August to 52.8 in September. The lower figure stemmed largely from an easing in sales growth, with new export orders down somewhat. Hiring continues to be positive, but sluggish. Along those lines, manufacturing surveys from the Kansas City and Richmond Federal Reserve Banks also noted some disappointing results for September, pulling back from increases observed in August. In addition, durable goods sales edged higher in August, but new orders data generally disappointed, particularly when you look at the broader market.

Overseas data suggest that the economies in China and Europe continue to stabilize, with PMI readings showing expansion for three straight months in the Eurozone and two consecutive months in China. Hopefully, improvements in the global marketplace will result in increased exports ahead; although, that continues to be a challenge so far this year.

Meanwhile, consumer confidence has ebbed lower, with political gamesmanship and labor market concerns dampening sentiment. Americans responded less positively in surveys from both the Conference Board and the University of Michigan. In each case, the longer-term trend reflects upward movement from earlier in the year or relative to past years, but the recent declines have still been notable. At least for now, however, the reduction in consumer perceptions about the economy has not impacted overall spending behavior, at least not too much. Personal spending rose modestly in August, with year-over-year growth at 3.2 percent. This indicates a faster annual pace than in previous months, suggesting a bit of a rebound.

Looking at the housing market, new home sales rose 7.9 percent in August, recovering somewhat from the sharp drop in July. Higher borrowing costs have reduced residential sales activity, but with the Fed deciding not to taper at its last meeting, mortgage rates have begun to fall, which should be beneficial in the short term. Freddie Mac reported the average 30-year mortgage rate at 4.32 percent last week, down from 4.50 percent the week before. Still, this remains a full percentage point higher than that from the first week of May.

This week, the largest headlines will come on Friday with the release of September’s jobs numbers. Nonfarm payrolls are anticipated to show an increase of around 170,000, or roughly the same as in August. Manufacturing hiring should be positive, but only barely so. The other big news will come tomorrow with the September PMI figures from the Institute for Supply Management. Similar to other sentiment surveys, the consensus expects a modest pullback in the index, with growth easing from the strong rebound noted in both July and August, particularly for new orders. We will also get the latest reports on manufacturing activity from the Chicago and Dallas Federal Reserve Banks and new data on construction spending and factory orders.

Chad Moutray is the chief economist, National Association of Manufacturers.

personal income and spending - sept2013

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Conference Board: Consumer Confidence Dips Slightly in September

The Conference Board said that consumer confidence dipped slightly, down from 81.8 in August to 79.7 in September. As such, it mirrored a preliminary finding from the University of Michigan and Thomson Reuters, which was released earlier in the month. (A final reading from the University of Michigan will be released on Friday.) Even with the decline, it is clear that Americans remain more positive today than earlier this year, as the consumer confidence index had stood at just 58.4 in January.

The decline in the Conference Board measure stemmed mostly from the expectations component, which fell from 89.0 to 84.1. Individuals were still more upbeat than a few months ago. Six months ago (March), the forward-looking confidence indicator was 63.7. With that said, the deceleration in September was notable. Budget battles in Washington, higher gasoline prices, and increased borrowing costs have eaten away at sentiment this month.

Beyond those factors, surveys such as this tend to respond to pocketbook issues. In this case, the percentage of respondents expecting an increase in their incomes declined from 17.5 percent in August to 15.4 percent in September. This corresponded with an uptick in those anticipating a decrease in their incomes, up from 13.5 percent to 14.6 percent. Similarly, the percentage saying that there will be more jobs in the months ahead fell from 17.5 percent to 16.9 percent. With such concerns about the labor market, it is perhaps not a surprise that Americans remain slightly more anxious.

The percentage of respondents planning to purchase a new home rose from 5.1 percent in August to 5.9 percent to September, but that proportion remains below the percentage observed in July (6.9 percent). To be fair, house buying plans remain more positive than not, particularly when compared to earlier in the year, and the July figure was a bit of an outlier. Other buying intentions were mixed, with more Americans planning to purchase an automobile (up from 10.6 percent to 12.3 percent), but fewer of those taking the survey stating that they will buy an appliance (down from 49.0 percent to 47.7 percent).

Chad Moutray is the chief economist, National Association of Manufacturers.

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