Tag: consumer confidence

Monday Economic Report – September 15, 2014

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

The latest NAM/IndustryWeek Survey of Manufacturers found that businesses are generally upbeat about the coming months. Manufacturing respondents expect 4.4 percent growth in sales on average over the next 12 months, the fastest pace of expected growth in new orders since the first quarter of 2012, when the sector was expanding more robustly. Indeed, nearly half of those taking the survey anticipate sales growth of at least 5 percent. Capital investment and hiring trends have also moved in the right direction, with manufacturers planning to increase capital spending and employment by 2.5 percent and 1.9 percent, respectively. The hiring figure represents substantial progress from the lackluster pace of job growth in 2013, which averaged just 0.8 percent. Overall, 87.3 percent said that they were positive in their outlook, the highest reading in two and a half years.

Nonetheless, the more positive attitude needs to be balanced against other issues. First, enthusiasm for expanded new orders and production is often nuanced by anxieties that events might prevent the economy from gaining traction—much as it has time and again in this recovery. Certainly, many of them are disappointed with the slow economic growth in the first half of 2014, even if they remain hopeful about the second half.

Second, manufacturers—like many Americans—continue to be frustrated with Washington. The top business challenges remain rising health insurance costs and an unfavorable business climate, cited by 77.1 percent and 73.1 percent, respectively, in the survey. Along those lines, the NAM released a study showing the disproportionate burden placed on small businesses and manufacturers when complying with federal regulations. Total federal compliance costs in 2012 were estimated to be $2.028 trillion, with an average cost of $19,564 per employee for manufacturers, or twice the level of all businesses.

Beyond these issues, there was encouraging news on the consumer front. Retail sales rose 0.6 percent in August, rebounding from softer increases in the previous three months. Prior to this release, there were worries that a more cautious consumer might derail brighter prospects for growth. This data suggests that the public might be more willing to spend. Retail sales have risen 3.8 percent year-to-date, or 5.0 percent over the past 12 months. Moreover, the consumer also appears to be less hesitant about borrowing, with July consumer credit up 9.7 percent in July. This included a sizable pickup in revolving credit, which includes credit cards. Another positive was the increase in consumer sentiment from the University of Michigan and Thomson Reuters, ending a lull in that measure throughout 2014 and marking its highest point since July 2013.

This morning, we will get new data on industrial production. Production in the sector jumped one percent in July, and the expectation is for modest gains in manufacturing output in August. It is also anticipated that housing starts and permits will once again exceeding one million annualized units when August figures are released on Thursday. This would suggest that residential construction activity has begun to recover from softness earlier in the year. Beyond those figures, the biggest headlines will come from the Federal Open Market Committee meeting this week, which is not expected to make any major shifts in monetary policy. Quantitative easing should end in October, with the largest focus being uncertainty over when the Federal Reserve will start raising short-term rates. With that said, new consumer and producer price data should reflect the recent easing in inflationary pressures, particularly from lower energy costs.

Other data releases this week include the latest findings on manufacturing activity in the New York and Philadelphia Federal Reserve Banks’ districts and data on home builder confidence, leading indicators and state employment.

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

retail sales - sept2014

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University of Michigan: Consumer Confidence Has Risen Somewhat in September

The University of Michigan and Thomson Reuters said that preliminary data on consumer confidence reflects a slight increase in September. The Consumer Sentiment Index increased from 82.5 in August to 84.6 in September, its highest level since July 2013. These figures suggest that the lull in confidence that we have seen so far this year might finally be starting to dissipate. Prior to the September reading, for instance, the University of Michigan index has averaged just 81.9, and it was little changed since recovering from the budget showdown last fall. In contrast, the Conference Board’s confidence measure has reached pre-recessionary highs in its most recent report.

The subcomponents in the University of Michigan data continue to reflect some anxieties on the part of the consumer. For instance, the index for the current economic environment slipped a bit this month, down from 99.8 to 98.5, even as it represents an improvement from earlier in the year. Americans remain concerned about labor market and income growth, and this is likely responsible for the decline in the present figure. Geopolitical events might also play into this. Still, the future-oriented index rose strongly, up from 71.3 to 75.6, its highest level in over one year, suggesting more optimism moving forward.

We will get final data on September consumer sentiment from the University of Michigan on September 26. The Conference Board will also release its survey data on consumer confidence on September 30.

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

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Monday Economic Report – September 2, 2014

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

Manufacturers continue to report improved activity in August. Last week, the Dallas, Kansas City and Richmond Federal Reserve Banks all noted expanding levels of new orders and production for the month, mirroring releases from the New York and Philadelphia Federal Reserve Banks in the prior weeks. These surveys reflect rebounds from earlier in the year, and perhaps more importantly, they suggest a mostly upbeat assessment in demand, output, hiring and capital spending over the next six months. At the same time, the Dallas and Kansas City studies showed some easing in growth rates in August, with the latter indicating that hiring had turned negative for the month. Exports also contracted in the Kansas City district, showing persistent international sales weaknesses in that region. The data illustrate that, even where we have seen progress, there are often some nagging challenges beneath the surface.

This same observation could be made about much of the other data released last week, too. For instance, new durable goods orders soared in July, up a whopping 22.6 percent. This represented an all-time high for the data series, but it was also largely the result of a jump in nondefense aircraft sales. Commercial airplane orders are choppy, with sales usually announced in batches. New durable goods orders have improved from earlier in the year. Outside of transportation, the manufacturing sector was weak in July. New durable goods orders excluding transportation fell 0.8 percent for the month. This suggests that the broader market for manufacturers was soft in July despite the sky-high headline figure.

Along those lines, the Conference Board reported that consumer confidence rose to its highest point since October 2007. This increase stemmed from improvements in views about the current economic environment. Yet, the Conference Board’s figures also suggested some lingering worries about employment and income growth. The University of Michigan and Thomson Reuters’ report on consumer sentiment seems to focus even more on these anxieties. Even with a marginal increase in the August confidence measure, the University of Michigan data have not changed much this year, and respondents have had a diminished view of future growth over the past few months, not unlike what was seen in the Conference Board data. Geopolitical worries might be playing into these doubts. Either way, the confidence reports mirror other indicators, which show that consumers are cautious right now. Personal spending in July declined for the first time since January, consistent with other data showing flat retail sales.

Despite some softness in July, personal spending has increased at an annualized 4.1 percent over the past six months. Indeed, consumer and business spending were strengths during the second quarter, according to the latest revision of real GDP growth. The U.S. economy grew 4.2 percent at the annual rate during the second quarter, slightly better than the 4.0 percent original estimate and reflecting a rebound from the 2.1 percent decline in the first quarter. The biggest disappointment in the second quarter continued to be international trade figures, with net exports serving as a drag on growth. Moving forward, I estimate real GDP growth of roughly 3.0 percent during the second half of 2014. A number of risks abound, and business leaders and consumers remain tentative. If the first half of this year has taught us anything, it is an optimistic recovery can still be a fragile one.

This week, we will get additional insights regarding the health of the manufacturing sector. This morning, the Institute for Supply Management will release its August Purchasing Managers’ Index data for the sector. The ISM report found strong gains in demand, output and employment in July, and the August survey is expected to show another pickup in activity. Moreover, the Bureau of Labor Statistics will publish new jobs numbers on Friday. Manufacturers have added 15,000 workers on average each month since August 2013, with a 22,000 average from May to July of this year. Look for continued hiring growth for the sector in the August numbers that are at least consistent with the average of the past year. Other highlights this week include the latest data on construction spending, factory orders, international trade and productivity.

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

personal spending - sept2014

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Monday Economic Report – August 18, 2014

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

While geopolitical events continue to provide significant downside risks to the economy, recent data suggest that manufacturers in the United States are faring better this summer. Manufacturing production increased 1.0 percent in July, helping to lift the year-over-year pace of manufacturing output to 4.9 percent, its fastest annual pace since June 2012. Last month’s gain stemmed largely from increased motor vehicle production, with all but three of the major manufacturing sectors notching higher output levels for the month. At the same time, the utilization rate for manufacturers increased to 77.8 percent, nearly reaching pre-recessionary capacity levels.

Similarly, the Empire State Manufacturing Survey reflected strong growth in August, albeit less so than the robust levels observed in July. More importantly, respondents to the New York Fed’s survey were significantly more upbeat, with roughly 60 percent anticipating higher sales and output over the next six months. This study also reported that approximately 30 percent of manufacturers in its district planned to hire more workers and invest in additional capital expenditures in the coming months. This is welcome news, and it was largely consistent with the recent pickup in the labor market. Manufacturing job openings increased in June to their highest level in two years, with net hiring also accelerating. Of course, we already knew that to some extent. The most recent employment data found that manufacturers hired an additional 22,000 workers on average from May to July.

Meanwhile, the European economy has shown signs of backtracking, with real GDP in the Eurozone remaining unchanged in the second quarter. Germany’s economy contracted by 0.2 percent, helping to push the continent’s growth figure lower, but Italy (also down 0.2 percent) and France (flat for the second straight quarter) were also weak. In addition, industrial production has decreased in three of the past four months, with output unchanged year-over-year. We will get our first look at August purchasing managers’ index (PMI) data this week. The Markit Eurozone Manufacturing PMI report in July provided mixed news, with activity expanding for 13 straight months but growth continuing to ease over the course of this year. The latest data suggest that Europe’s economic challenges are still not behind them.

To some extent, that is true in the United States as well. We have seen improvements in a number of economic indicators, and yet, there are also persistent worries about future growth. Some of this could stem from global anxieties, but it could also be a function of disappointment with the lack of growth in the first half of the year. Preliminary consumer sentiment data from the University of Michigan and Thomson Reuters appears to pick up on this nuance, with Americans less confident once again in their forward-looking expectations. Indeed, retail sales data also reflect cautiousness on the part of the consumer, with spending unchanged in June.

This week, we will get additional insights about the health of the manufacturing sector worldwide. In addition to new PMI data for Europe, Markit will also release flash reports for China, Japan and the United States. While China’s economy had begun to stabilize in July, last week we learned that Japan’s real GDP contracted by 1.7 percent in the second quarter, or 6.8 percent year-over-year. Closer to home, the Federal Reserve will release the minutes of its July 29–30 Federal Open Market Committee meeting. Analysts will be looking for clues about when the Fed plans to start normalizing short-term rates. The Fed received good news last week with an easing in producer prices in July from recent highs, and this should help to alleviate some of the immediate pressure from inflation hawks, at least for now. Other highlights this week include the latest data on consumer prices, housing starts and permits, leading indicators and Philadelphia Fed manufacturing sentiment.

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

manufacturing production - aug2014

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University of Michigan: Consumer Confidence Slipped Again in August

The University of Michigan and Thomson Reuters said that preliminary data on consumer confidence slipped again in August. The Consumer Sentiment Index decreased from 81.3 in July to 79.2 in August, its lowest level in 9 months and off significantly from the recent high of 84.1 in April. The average reading year-to-date in 2014 is 81.5, up marginally from the 79.2 average of 2013 as a whole.

Interestingly, as the University of Michigan’s data has reflected less optimism on the part of consumers of late, a similar report from the Conference Board had its consumer confidence measure reaching a pre-recession high in July. As such, these competing data points show the complex thinking of the American consumer right now, with economic data showing rebounding activity from earlier in the year but also with nagging worries about future growth.

Indeed, the August University of Michigan data reflect this nuance. The index for present conditions improved (up from 97.1 to 99.6), but the forward-looking expectations measure dropped significantly (down from 71.1 to 66.2). The latter measure was at its lowest level since the government shutdown last fall. It is possible that Americans are reacting to geopolitical events in this survey.

We will get final data on August consumer sentiment from the University of Michigan on August 29. The Conference Board will also release its survey data on consumer confidence on August 26.

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

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Monday Economic Report – August 4, 2014

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

The U.S. economy has rebounded after a slow start to the year, with a number of data sources last week showing manufacturing activity growing strongly of late. First, real GDP increased by a healthy 4.0 percent in the second quarter, more than offsetting the 2.1 percent drop in output during the first quarter. Consumer and business spending spurred the higher figure. Inventory investments alone contributed one-third of the growth in real GDP for the quarter, with higher investment levels for housing, nonresidential structures, equipment and intellectual property. In addition, goods spending increased at its fastest pace since the fourth quarter of 2010. Net exports, however, continued to be a weakness, with growth in goods imports outstripping increases in goods exports. Moreover, one cannot help but be frustrated with weak economic growth so far this year, even if the outlook has improved. Real GDP rose by a frustratingly slow 0.9 percent in the first half of 2014. Fortunately, manufacturers are cautiously upbeat about future growth.

The Institute for Supply Management’s (ISM) manufacturing Purchasing Managers’ Index (PMI) increased from 55.3 in June to 57.1 in July. More importantly, the production index has measured 60 or more for each of the past three months, indicating strong output growth. Demand and hiring were also up sharply, but export sales growth eased, and raw material costs remained elevated. Similarly, the Dallas Federal Reserve Bank’s survey also noted accelerating manufacturing activity, with overall activity up for the 14th consecutive month. The underlying data in that report were mostly higher across-the-board, and at least 45 percent of respondents expect sales, production and shipments to increase over the coming months, with just single-digit percentages anticipating declines. These findings mirror those of other recent regional surveys.

Meanwhile, the latest jobs report was mostly positive, with manufacturers adding 28,000 workers on net in July. More than half of that stemmed from the automotive sector, signifying that, if anything, employment growth could be more broad-based within the sector, extending in particular to the nondurable goods sector more. Yet, manufacturing employment has picked up, averaging 22,000 over the past three months and nearly 15,000 per month since August. Moreover, we continue to hear about skills shortages in many locations, which could create wage pressures moving forward. In fact, during the second quarter, manufacturing wages and salaries increased at their fastest pace in more than a decade, driving up overall employment costs. Nonetheless, total compensation for manufacturers has risen by 2.1 percent year-over-year, suggesting that wage pressures remain in check for the most part—at least for now.

Along those lines, personal income and spending both increased by 0.4 percent in June. Since January, when winter weather dampened purchases, personal spending has risen 2.2 percent, with year-over-year growth of 4.0 percent. This suggests that Americans continue to spend at a decent pace, even if their purchase decisions remain selective and cautious. Furthermore, there were two consumer confidence surveys released last week, with each moving in opposite directions. The University of Michigan and Thomson Reuters found that sentiment edged lower in July, with little change in confidence since December and persistent anxieties about the future direction of the economy. In contrast, the Conference Board observed that sentiment was at its highest point since the beginning of the recession (December 2007), led by an improved perception about the labor market. However, rising confidence did not necessarily translate into increased buying intentions.

For its part, the Federal Reserve Board noted recent improvements in the economy, but it also believes there continues to be “significant underutilization of labor resources.” The Federal Open Market Committee (FOMC) voted to continue tapering its long-term and mortgage-backed security purchases, down from $35 billion to $25 billion per month. These purchases are expected to end by October. While the FOMC will keep short-term rates near zero for now, these rates are predicted to begin rising sometime early in 2015. Nonetheless, the Federal Reserve will continue to monitor incoming economic data, including inflationary pressures. Recent data have shown prices accelerating, but at least for now, they appear to be under control. For instance, core inflation, which excludes food and energy costs, has increased 1.6 percent over the past 12 months, according to personal consumption expenditure deflator data released last week.

There are just a handful of data releases this week. Highlights include the latest data on exports, factory orders and productivity.

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

real GDP forecast - aug2014

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Monday Economic Report – July 21, 2014

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

With more and more data starting to trickle in for June, we are seeing some definite trends taking shape. One positive is that the manufacturing sector continues to expand, suggesting that the rebound from winter-related softness earlier in the year has mostly continued. Manufacturers also tend to be mostly upbeat about the second half of this year—a sign of optimism that is encouraging. Yet, there were also indicators suggesting that the pace of activity slowed somewhat in June, most notably in the industrial production, housing starts and retail sales numbers that were released last week.

Indeed, manufacturing output in June increased at its slowest rate since January, with relatively mixed news overall. Nondurable goods production edged higher, up 0.1 percent, but output from nondurable goods manufacturers declined by 0.3 percent. Monthly declines in production in such sectors as apparel, machinery and motor vehicles nearly offset output gains for aircraft, furniture, metals and plastics, and rubber products. Longer-term trends remain reassuring, even if they still leave room for improvement. Over the past 12 months, manufacturing production has increased 3.5 percent, a decent figure overall and progress from the much slower pace of just 1.5 percent in January. Durable goods output has risen by a healthy 5.5 percent year-over-year, whereas nondurable goods activity was a less robust 1.5 percent in the past year.

Housing starts in June were also weaker than expected, down from an annualized 985,000 in May to 893,000 in June. Starts were lower for both single-family and multifamily units. There have been suggestions that rain might have attributed to the weaker construction activity, with storms preventing some units from breaking ground. Yet, single-family starts have struggled for some time, down 4.3 percent over the past 12 months. On the positive side, single-family housing permits rose for the second straight month, up from 615,000 to 631,000 at the annual rate for the month. This could suggest stronger growth in the housing market in the coming months for single-family homes. Along those lines, homebuilder confidence increased to its highest point since January, with better expectations for sales over the next six months.

Meanwhile, surveys out last week reported multiyear highs in the pace of manufacturing activity. New orders and shipments were up sharply in surveys from the New York and Philadelphia Federal Reserve Banks. Hiring also picked up in both regions, and raw material costs remained elevated relative to prior months. More importantly, manufacturers in each survey said they were optimistic that sales, output, employment and capital spending would increase over the next six months. In fact, the Philadelphia Federal Reserve report found that 56.1 percent of its respondents anticipated higher new orders, with 60.4 percent predicting increased shipment levels. In addition, the Manufacturers Alliance for Productivity and Innovation (MAPI) reported that the business outlook rose for the sixth consecutive quarter on accelerated sales domestically and abroad. Shipments and capital spending were also anticipated to grow strongly moving forward.

On the consumer front, Americans continue to be cautious in their purchase decisions. Retail spending increased 0.2 percent in June. This was the slowest pace since January, and it was below expectations. Reduced auto sales contributed to this lower figure. Despite the slower activity levels in June, the year-over-year pace continues to grow at decent levels, up 4.3 percent over the past 12 months. Preliminary consumer confidence data also indicate some nagging anxieties in the economy, according to the University of Michigan and Thomson Reuters. The Consumer Sentiment Index unexpectedly decreased from 82.5 in June to 81.3 in July, and consumer attitudes have not changed much since December. Much of July’s decrease stemmed from weaker expectations about the future economy. However, higher gasoline prices might have also been a factor. Indeed, the producer price index increased in June largely on higher energy costs.

This week, we will get additional insights on the health of manufacturing worldwide. Markit will release preliminary purchasing managers’ index reports for China, Japan, the Eurozone and the United States for July. We will be looking for continued progress in Asia and the United States and we hope a reversing of the easing in activity in Europe. The Kansas City and Richmond Federal Reserve Banks will also report on their latest manufacturing surveys. Beyond these releases, the Bureau of Economic Analysis will publish real GDP data by industry for the first quarter; given the 2.9 percent drop in real GDP during the first quarter, we would anticipate minimal contributions to growth from the manufacturing sector. Other highlights include the latest data on consumer prices, durable goods orders and existing and new home sales.

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

manufacturing production growth - jul2014

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University of Michigan: Consumer Confidence Slipped Somewhat in July

The University of Michigan and Thomson Reuters said that preliminary data on consumer confidence slipped somewhat in July. The Consumer Sentiment Index unexpectedly decreased from 82.5 in June to 81.3 in July. The consensus expectation had been for a slight gain. Over the course of the last eight months (December to July), the index has averaged 81.8. In essence, after consumer attitudes recovered from the government shutdown in December, they have not really moved that much. The April reading of 84.1 is the one outlier in that time frame.

Looking specifically at the July data, it is clear that the drop in consumer sentiment in the month stemmed from weaker expectations about the future economy. The forward-looking component has declined from 74.7 in April to 71.1 in July. In contrast, views about the current economic environment were more mixed, with an improvement in July (up from 96.6 to 97.1) but with slightly weaker perceptions than seen in April (98.7).

This nuanced perception could be influenced by the competing news about the health of the U.S. economy, with disappointing data on real GDP growth in the first quarter perhaps outweighing better labor market headlines of late. Either way, it suggests that consumers continue to remain cautious.

We will get final data on July consumer sentiment from the University of Michigan on August 1. The Conference Board will also release its June survey data on consumer confidence on July 29.

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

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Monday Economic Report – June 30, 2014

Here are the files for this week’s Monday Economic Report: 

The U.S. economy contracted in the first quarter more than we previously thought, with real GDP down 2.9 percent at the annual rate. The sharply lower revision was much worse than the previous estimate of a 1.0 percent drop. Decreased inventory spending and weaker goods exports accounted for much of the decline in output, but consumer spending on services also increased at a slower pace than earlier reports suggested, contributing to the latest revision. Fixed investment and government spending were also drags on growth. Overall, the data confirm that economic activity started 2014 on a disappointing note, but they also suggest that this softness went beyond weather-related slowdowns.

However, the real GDP data also point to a possible strong rebound in the current quarter. For instance, inventory spending is likely to pick up as more firms restock their shelves. In addition, other data point to recoveries in manufacturing activity and retail sales in the second quarter, which should help boost consumer and business spending figures. Real GDP should exceed 3 percent in the second quarter, bouncing back from the weak data in the first quarter. Moreover, manufacturers remain mostly positive about the second half of this year. Perhaps that is why financial markets seemed to mostly shrug off the bad news on real GDP last week.

Indeed, many of the measures of health for the manufacturing sector remain encouraging. The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) increased from 56.4 in May to 57.5 in June. This was its fastest pace in more than four years, led by strong gains in both new orders and output. Manufacturer sentiment in both China and Japan also stabilized after contractions in previous months. At the same time, manufacturing activity in the Kansas City and Richmond Federal Reserve Bank districts continued to expand, albeit with both at slower paces than the month before. These two releases were largely consistent with other regional surveys, including those from New York and Philadelphia, showing rebounds since the winter months.

Still, not all of the manufacturing news out last week was positive. Durable goods orders fell 1.0 percent in May, reflecting weaker-than-anticipated growth for the sector. Much of that decline stemmed from reduced nondefense aircraft and parts sales, although the broader data were also mixed. Meanwhile, European manufacturing activity continued to decelerate. The Markit Flash Eurozone Manufacturing PMI declined from 52.5 to 51.9, falling for the second straight month. Slower growth on the continent has weakened many of the key activity measures, including new orders, output, exports and employment. Of course, it is also worth noting that Europe’s expansion remains uneven, with Germany seeing a marginal gain in activity in June while France fell back into a contraction.

In other news, personal spending improved in May after remaining flat in April, assisted by a decent rebound in durable goods purchases. Personal income also showed a slight uptick, with manufacturing wages and salaries continuing to move higher. Such reports have helped to lift consumer confidence, with data from the Conference Board’s index increasing to its highest level in more than six years. The consumer sentiment measure from the University of Michigan and Thomson Reuters also edged higher, but with persistent anxieties about future economic and income growth. Finally, there were encouraging headlines on the housing market last week, with strong gains in both existing and new home sales in May.

This week, we will get new jobs numbers on Thursday—one day earlier due to the Independence Day holiday on Friday. I would expect employment growth similar to what we saw in May, with a consensus estimate of 210,000 additional nonfarm payroll workers and around 10,000 or so net new manufacturing employees. There will also be new PMI data from the Institute for Supply Management and international trade figures. Each will be closely watched, with manufacturing activity expected to pick up and we hope better news for exports. Other highlights include news releases for construction spending, factory orders and manufacturing activity in the Dallas Federal Reserve district.

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

contributions to change in real GDP - jun2014

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Monday Economic Report – June 16, 2014

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

Despite a very weak start to 2014, there is an expectation among manufacturers that the second half of the year will be better than the first. Indeed, average manufacturing sales forecasts in the latest NAM/IndustryWeek survey were the highest in two years, with capital investment and hiring plans also moving in the right direction. Indeed, these data points were consistent with 4.0 percent production growth in the sector between now and the fourth quarter of this year, and roughly 86 percent of respondents were either somewhat or very positive in their outlook. These findings mirrored similarly optimistic assessments from business economists, who predict real GDP growth of 3 percent or more in each of the remaining quarters of 2014, with industrial production up 3.7 percent for the year as a whole.

Despite more upbeat perceptions for the coming months, concerns continue to linger. Respondents to the NAM/IndustryWeek survey remain frustrated with political inaction and the slow pace of economic growth. The top business challenges continue to be rising health care costs (72.7 percent) and an unfavorable business climate (71.4 percent). When asked about policy priorities for the next few years, slowing entitlement spending (84.4 percent), finding a long-term budget deal (82.9 percent), reducing regulatory burdens (81.9 percent) and controlling health care costs (78.5 percent) were at the top of the list.

At the same time, consumers remain cautious. The University of Michigan and Thomson Reuters reported that consumer confidence edged lower for the second straight month, although sentiment has not changed much in the first six months of this year. There are persistent worries about labor and income growth, which appear to be preventing Americans from being more optimistic about the future.

These anxieties might also have been a factor in the weaker-than-expected retail spending numbers for May. While retail sales rose for the fourth consecutive month and purchases continue to reflect a rebound from winter-related softness, May’s increase of 0.3 percent was about half of what was predicted. In fact, excluding motor vehicles and gasoline station sales, spending was flat for the month. Nonetheless, one could also paint a more positive picture, with retail sales up 2.2 percent since November and 4.3 percent year-over-year. So perhaps May’s figures were just a pause in an otherwise decent upward trajectory for consumer spending. Small business owners were more upbeat about sales expectations in the latest National Federation of Independent Business (NFIB) survey. The NFIB’s Small Business Optimism Index reached its highest level in May since September 2007, or before the recession began.

Along those lines, the number of nonfarm job postings reached a pre-recessionary high in April. For manufacturers, job openings have increased in the past two months but remain below their recent peak in November. April’s increases in the manufacturing sector were primarily from durable goods firms. Net hiring (or hires minus separations) was also up for the month in manufacturing; however, it also suggests weaker employment growth in early 2014 versus the more robust hiring activity in the second half of 2013. This leaves room for improvement for the coming months.

This week, we will get several economic indicators on manufacturing and housing activity. For example, this morning, the Federal Reserve is expected to show a rebound in industrial production for May after the decline in April, and we will be looking for similar signs in surveys from the New York and Philadelphia Federal Reserve Banks. Tomorrow, we will get new data on housing starts and permits, with the consensus being around 1.04 million annualized units in May, down slightly from 1.07 million in April. On the monetary policy front, we have seen increased pricing pressures of late, even as core inflation for producers declined in May. Yet, the Federal Reserve is not expected to alter its course this week when the Federal Open Market Committee meets. Other highlights this week include new information on consumer prices, leading indicators and state employment.

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

manufacturing job openings - jun2014

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