Tag: consumer confidence

Monday Economic Report – March 31, 2014

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

The U.S. economy grew 2.6 percent in the fourth quarter, according to the most recent revision, and for 2013 as a whole, real GDP growth was a rather lackluster 1.9 percent. Consumer spending, business investment and net exports were bright spots in the fourth quarter, with reduced government spending subtracting nearly one percentage point from growth.

Meanwhile, business economists predict real GDP growth of 2.8 percent on average for 2014, with 1.9 percent growth in the current quarter. (My own forecast is marginally higher for both, up 3.0 percent for the year and 2.1 percent for the first quarter of 2014.) Weather-related slowdowns account for the deceleration in activity, particularly for manufacturers, in the current quarter. However, modest growth is expected to resume once temperatures warm up, and we have already begun to see that. The National Association for Business Economics (NABE) Outlook Survey also suggested that the industry should grow 3.2 percent in 2014 and 3.4 percent in 2015, which would indicate a pickup from the current pace.

The latest manufacturing surveys show a rebound in sentiment after softness from December to February. The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) slowed a bit, down from 57.1 in February to 55.5 in March. Despite the lower figure, new orders and production growth continued to grow relatively strongly, with overall manufacturing activity improved from January’s winter storms. A similar recovery was seen in regional data from the Kansas City Federal Reserve Bank, mirroring the findings from New York and Philadelphia the week before. Still, not everyone has seen improvements yet. The Richmond Federal Reserve reported lackluster growth in sales and output, with weather continuing to “wreak havoc” for many manufacturers. In addition, while new durable goods orders were up a strong 2.2 percent in February, sales growth increased at the less-than-robust rate of just 0.2 percent when transportation orders were excluded.

On the consumer front, the data were mostly positive, but with some caveats. Personal income and spending both increased 0.3 percent in February, with each rising 3.0 percent over the past 12 months. This was a decent pace, but increased purchases of nondurable goods and services mainly fueled spending growth in February. Durable goods spending declined for the third month in a row. In terms of consumer confidence, the two reports out last week were mixed. The Conference Board’s measure of consumer sentiment reached a six-year high; yet, labor market worries dampened enthusiasm for the current environment. Likewise, the University of Michigan and Thomson Reuters reported that consumer sentiment edged lower in March, with employment and income growth also weighing on respondents’ minds. In both surveys, however, Americans are more confident today than in the fall during the government shutdown.

Looking overseas, Markit released preliminary manufacturing PMI data for China and the Eurozone. Chinese manufacturing activity has now contracted for three consecutive months, with March’s pace being the slowest since July. The data mirror other recent indicators, including industrial production, fixed asset investment and retail sales, which have slowed. As such, they all suggest that real GDP might fall below the 7.7 percent rate in the fourth quarter. (First-quarter real GDP for China will be released on April 15.) Meanwhile, European manufacturers have seen expanding activity levels for nine straight months, even as Eurozone PMI values eased slightly in March. New orders and production remain strong in Germany, and, of note, French manufacturers were positive in their sentiment for the first time since June 2011.

This week, the focus will be on the March jobs numbers, which will come out on Friday. The consensus expectation is for nonfarm payroll growth of around 190,000, with manufacturers hiring somewhere near the 12,000 average experienced in the sector since August. In addition, the Institute for Supply Management (ISM) is expected to show a slight rebound in manufacturing PMI activity in its March data, up from 53.2 in February. Other highlights this week include the latest data on construction spending, factory orders and international trade.

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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Monday Economic Report – March 17, 2014

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

Recent events around the world remind us that the global economic and political environment remains uncertain. Manufacturers have had to cope with weather-related softness over the past few months, worries about the geopolitical situation and slowing growth rates in some of our largest trading partners, specifically China. Despite these challenges, they continue to be mostly upbeat about future activity.

The latest NAM/IndustryWeek Survey of Manufacturers found that 86.1 percent of respondents were positive about their company’s outlook, up from 78.1 percent three months ago, with increased expectations for sales, exports, employment and capital spending. Still, smaller manufacturers were less positive, particularly in their investment plans. The top challenges were the business climate and rising health care and insurance costs, with respondents noting the need for comprehensive tax reform and expressing concern about ever-increasing regulatory burdens.

Government regulations were also cited as the most important problem in the latest National Federation of Independent Business (NFIB) survey of small business owners. It was one of two sentiment surveys released last week showing reduced confidence. NFIB’s Small Business Optimism Index fell sharply, down from 94.1 in January to 91.4 in February. The percentage saying it was a good time to expand declined, with weak sales and earnings expectations. Likewise, preliminary March consumer confidence numbers from the University of Michigan and Thomson Reuters were also lower, perhaps reflecting concerns about job and income growth.

On the positive side, retail sales began to rebound in February, up 0.3 percent. While this was not enough to make up for the weather-induced declines of December and January, it did suggest there were possible “green shoots” on the consumer spending front, with Americans starting to return to the stores. For instance, the auto sector saw modest sales gains in February, a trend seen in other hard-hit sectors as well.

This week, much of the focus will be on the Federal Reserve Board, with a new monetary policy statement from the Federal Open Market Committee (FOMC) coming out on Wednesday. While hiring remains soft (as the latest job openings numbers show), the unemployment rate is likely to reach the 6.5 percent threshold in the next month or two. Therefore, the expectation is that the FOMC will change its forward guidance on short-term interest rates to omit mention of an unemployment rate target. Fortunately, pricing pressures remain minimal, allowing the Federal Reserve to continue to pursue highly accommodative policies, even as it continues to taper its long-term asset purchases. Look for the FOMC to reduce its purchases from $65 billion each month in long-term and mortgage-backed securities to $55 billion.

It will be a busy week for economic releases, including new data on industrial production and housing starts. Manufacturing output should rebound somewhat, even as bad weather dampened activity once again. Similar findings are expected in the New York and Philadelphia Federal Reserve Bank manufacturing surveys. Meanwhile, housing starts should also pick up slightly, but new residential activity will remain subpar relative to a few months ago. Still, we remain upbeat about the housing market for 2014 as a whole. Other highlights this week include new measures for consumer prices, homebuilder confidence and leading indicators.

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

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Monday Economic Report – March 3, 2014

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

The U.S. economy grew 2.4 percent in the fourth quarter, down from the earlier estimate of 3.2 percent. Given some of the recent weaker manufacturing, retail and housing data, the downward revision was largely expected. Still, there are some positives in the report, with strength in consumer spending, business investment and net exports. Fixed investment was higher in this revision, which was welcome news. Federal government spending accounted for the biggest drag on growth during the fourth quarter, subtracting one percentage point from the total figure.

The bottom line is that real GDP increased 3.3 percent in the second half of 2013, providing some momentum for growth moving into this year. While weather and other factors have dampened the economy recently (and will also reduce real GDP in the current quarter), we still expect 3.0 percent growth for 2014. Manufacturers continue to be mostly upbeat about demand and production over the coming months.

Despite such optimism in the outlook for the year, the current environment for manufacturers clearly has its challenges. Weather has negatively impacted production and shipments in a number of regions around the country, and surveys from the Dallas, Kansas City and Richmond Federal Reserve Banks all observed some easing in activity in February. This followed similar reports from the New York and Philadelphia Federal Reserve Banks the week before. Meanwhile, the Census Bureau has reported lower new durable goods orders for two straight months, with poor weather conditions likely a factor, particularly for auto sales. At the same time, new durable goods orders excluding transportation were higher, suggesting that the broader manufacturing market was slightly better than the headline figure indicated.

Some of the other data remain mixed. New home sales were up sharply in January to their highest level since July 2008, but year-over-year growth was more modest, and inventories of new homes have fallen over the past few months. Nonetheless, the positive report on new home sales stands in contrast to much weaker residential construction figures of late, including housing starts and existing home sales, which have seen negative impacts from the weather. Similarly, the two major reports about consumer confidence moved in opposite directions, with the Conference Board’s measure lower in February and the University of Michigan’s figure edging slightly higher. Doubts about income and labor growth have possibly fed some anxieties in sentiment in both surveys, but the two reports differ in their findings about the economic outlook.

This week, the focus will be on manufacturing activity, employment growth and international trade. We will get February Purchasing Managers’ Index (PMI) data from the Institute for Supply Management (ISM) later this morning. After falling from 56.5 in December to 51.3 in January, the ISM PMI is expected to increase modestly, still indicating weaknesses in new orders and production for the month. On the trade front, we will be looking for better manufactured goods exports in 2014, improving on the modest 2.4 percent growth rate seen in 2013. Still, manufactured goods exports hit an all-time high last year, providing a positive for economic growth.

The biggest news of the week will come on Friday with the release of new jobs numbers. Nonfarm payroll growth has been soft over the past two months, with just 75,000 and 113,000 net new workers added in December and January, respectively. The consensus expectation is for roughly 165,000 nonfarm workers added in February. In contrast, manufacturing job gains have been fairly decent over the past six months, averaging 15,500 since August, and we should get modest gains again in February. One of the bigger conversation pieces will be whether the unemployment rate falls to 6.5 percent in February, which is the rate specified in the Federal Reserve Board’s forward guidance. (Either way, look for the Federal Open Market Committee to change its guidance at its next meeting.) Other highlights this week include the latest data on construction spending, factory orders, personal income and spending and productivity.

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

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Monday Economic Report – February 18, 2014

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

A perfectly timed winter storm at the end of last week coincided with news that cold weather has had a negative impact on consumer spending and manufacturing output. Manufacturing production declined 0.8 percent in January, ending five straight months of expanding activity. Poor weather conditions closed some facilities and hampered shipments. Capacity utilization also decreased, down from 76.7 percent in December to 76.0 percent in January. That was the lowest utilization level since July. Yet, to the extent that weather contributed to the fall in manufacturing output, I would expect production to rebound in the coming months. After all, manufacturing production increased 3.0 percent in the second half of 2013, and manufacturers continue to be mostly upbeat about demand for 2014.

Nonetheless, we saw the effects of the weather in other indicators released last week as well. Retail sales fell 0.4 percent in January, extending December’s 0.1 percent decline. Reduced auto sales were a major factor in this decrease, with motor vehicle purchases down 1.8 percent in December and 2.1 percent in January. If you exclude autos from the analysis, retail spending was unchanged.

Although the University of Michigan and Thomson Reuters consumer sentiment measure was unchanged in February, respondents’ view of the current economy has slipped since December. One might surmise that weather impacted labor markets and incomes, lessening current confidence. However, Americans seem more optimistic about the future, with the expectations component rising from 71.2 in January to 73.0 in February.

There were signs that the U.S. economy’s recent improvements continue to bear fruit. Small business leaders have become more confident, with the National Federation of Independent Business’s Small Business Optimism Index edging higher for the third straight month, and January’s data also show an increased willingness to add workers. The net percentage planning to hire in the next three months rose to its highest level since September 2007. Along those lines, the number of manufacturing job postings increased from 283,000 in November to 297,000 in December. We have seen job openings in the sector recover from weaknesses midyear in 2013. Nonetheless, manufacturing net hires eased in December, and there was notable softness in the larger economy, both for new hires and job openings.

This week, we will get new numbers for the housing market and the latest data on manufacturing activity from a number of sources, including surveys from the New York and Philadelphia Federal Reserve Banks and Markit. The latter will report Flash Purchasing Managers’ Index (PMI) findings for the United States, China and the Eurozone. We will be looking for further evidence on the impact weather has had for manufacturers in the United States and for signs of improvement overseas. The Chinese PMI data had contracted in January’s report, but with output continuing to grow modestly. (For more information on worldwide trends, see the Global Manufacturing Economic Update, which was released on Friday.) Other highlights for the week include the latest data on consumer and producer prices, leading indicators and existing home sales.

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

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Monday Economic Report – February 3, 2014

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

While equity markets around the world continue to worry about the emerging markets, the economic news in the United States has been more encouraging. In particular, we learned that real GDP grew at a relatively strong pace in the fourth quarter, up 3.2 percent. Robust growth in consumer spending and exports boosted the nation’s output, with the main drag being federal government spending. Note that this was the quarter that included the partial government shutdown, which might explain part of that decrease, with defense and nondefense government spending lower. Yet, the key takeaway from this data was the strength of the U.S. economy as we ended 2013, with real GDP increasing 3.7 percent at the annual rate in the second half of the year.

At the same time, it is worth noting that real GDP rose a more-disappointing 1.9 percent for 2013 as a whole, below the 2.8 percent figure seen in 2012. Likewise, personal income growth also decelerated, from 4.2 percent in 2012 to 2.8 percent in 2013. Personal incomes remained flat in general for the month. Nonetheless, total wages and salaries in the manufacturing sector increased from $760.9 billion in November to $763.6 billion in December, with annual growth of 1.9 percent. Meanwhile, personal spending in December rose 0.4 percent, extending the 0.6 percent gain observed in November. While the monthly increase resulted from a huge jump in nondurable goods spending, the annual data reflected larger increases for durable goods (7.1 percent versus 2.1 percent). In other developments, consumer confidence appears to have rebounded after falling during the government shutdown, as reflected in both Conference Board and University of Michigan reports.

Some of the other reports for the manufacturing sector were mixed. Regional sentiment surveys, such as those from the Dallas and Richmond Federal Reserve Banks, continue to show expanding levels of sales and production. Moreover, respondents remain mostly upbeat in their outlook for the next six months. In contrast, new durable goods orders dipped 4.3 percent in December. Moreover, even excluding the highly-volatile transportation sector, new orders would have fallen 1.6 percent, suggesting broader weaknesses beyond aircraft and motor vehicles. Shipments of durable goods were also lower. Weather could have been a factor, as well as the timing of some orders due to the holidays. As such, it will be interesting to see if upcoming data reveals the December data as an outlier.

For its part, the Federal Open Market Committee (FOMC) of the Federal Reserve stressed the positive, noting that “growth in economic activity picked up in recent quarters.” As expected, the FOMC further reduced its purchases of long-term and mortgage-backed securities from $75 billion each month to $65 billion. It had begun to taper these asset purchases at its December meeting. This marked the last meeting chaired by Ben Bernanke, as Janet Yellen became the chair of the Federal Reserve Board on February 1. The FOMC will continue to maintain its “highly accommodative” monetary policies for the foreseeable future, with short-term interest rates remaining effectively zero beyond when the economy reaches 6.5 percent. One notable element in the FOMC statement was that none of the participants dissented this time around. While the committee does have new participants for 2014, this was the first statement to not have a dissention since the June 2011 meeting.

This week, the focus will return to the labor market with the release of January employment numbers on Friday. Following the lackluster nonfarm payroll growth of December, the consensus is for 175,000 net new workers to have been added in January. For manufacturers, we will be looking to see if we can extend the strong hiring gains observed from August to December, adding an average of 16,000 jobs per month during that five-month period. Another highlight will be the December trade data, which will allow us to see if manufacturers were able to improve upon the mostly discouraging export figures that we have seen so far for 2013. Other economic indicators to watch include new data on construction spending, consumer credit, the Institute for Supply Management’s purchasing managers’ index, new factory orders and productivity.

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

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Monday Economic Report – January 21, 2014

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

Manufacturing production rose 2.6 percent in 2013, slowing from the 3.5 percent and 3.2 percent growth rate experienced in 2011 and 2012, respectively. Yet, the lower 2013 figure stemmed largely from weaknesses in the first half of the year, with manufacturing output rising an annualized 4.2 percent in the second half. As such, the sector ended the year on a strong note, with a pickup in demand and cautious optimism for 2014. Indeed, a number of other reports reached the same conclusion. Surveys from the New York and Philadelphia Federal Reserve Banks and from the Manufacturers Alliance for Productivity and Innovation (MAPI) both observed expanding levels of activity in their latest releases. Respondents to these surveys tended to be mostly upbeat about new orders, shipments, exports and hiring over the coming months—which is definitely good news.

Over the past couple years, the rebound in the housing sector has been one of the bright spots in the U.S. economy. Housing starts were lower in December, but it seems the November data were a bit of an outlier. Absent that soaring figure, new residential construction was generally higher to end 2013, particularly for single-family units. New single-family starts increased 7.6 percent year-over-year. Housing permits also eased slightly in December but increased 4.6 percent from the year before. The reduction in housing activity could have been due to severe winter storms, with somewhat higher borrowing costs as another possible contributing factor. The average 30-year mortgage rose from 4.29 percent in the week of November 27 to 4.48 percent in the week of December 26, according to Freddie Mac. Nonetheless, this still historically low rate helps to explain the generally upbeat assessment of home builders.

Meanwhile, the pace of retail sales slowed in December, with reduced auto sales dragging the overall figure lower. Still, motor vehicle sales increased 5.9 percent in 2013, making it one of the stronger components of consumer spending growth. Excluding autos, retail sales would have risen by 0.7 percent last month, suggesting broader strength than the headline figure implies. On a year-over-year basis, total retail spending increased 4.1 percent, a modest pace that marks the slowest since 2009.

The two measures of sentiment moved in opposite directions. Preliminary data from the University of Michigan and Thomson Reuters on consumer confidence was surprisingly lower for the month, down from 82.5 in December to 80.4 in January. The December data has noted a recovery in perceptions about the economy after falling in the wake of the government shutdown, and the expectation had been for January’s data to extend those gains. With a reduction in sentiment instead, this suggests that the public remains somewhat anxious about economic conditions. At the same time, the National Federation of Independent Business (NFIB) noted an increase in optimism for the second straight month. Underneath the main reading, however, the data were mixed, with more small business owners calling it a “good time to expand” but with sales and earnings remaining subpar.

In terms of news events, outgoing Federal Reserve Chairman Ben Bernanke delivered a speech at the Brookings Institution that provided his take on the lessons learned from the financial crisis. This “exit interview”—as it has been widely dubbed—was mostly a valedictory address defending the Fed’s monetary actions to help stimulate growth in the economy. Coincidently, Bernanke gave it on the same day that the Bureau of Labor Statistics reported that core consumer inflation had risen by just 1.7 percent over the past year. A similar conclusion on producer prices had been released the day before, and in each case, the data suggested that pricing pressures were increasing within an acceptable range, at least for now, according to the Fed’s stated targets.

There will only be a handful of economic data releases this week. From the manufacturing perspective, the highlights will come on Thursday. Markit will provide “flash” estimates for its purchasing managers’ index (PMI) reports for the United States, the Eurozone, and China. In addition, the Kansas City Fed will discuss the latest results of its regional manufacturing survey. In each instance, the expectation will be for manufacturers to note continued growth, building on recent gains. Other data releases include updates on the leading economic index and existing home sales.  

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

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University of Michigan: Consumer Confidence Ebbed Slightly to Begin 2014

The University of Michigan and Thomson Reuters noted that consumer confidence ebbed slightly to begin the new year. The Consumer Sentiment Survey’s overall index dropped from 82.5 in December to 80.4 in January, according to preliminary data. (Note that final data for the month will be released on January 31.) The expectation had been for consumer attitudes to extend the gains made in December, with Americans recovering from the more-pessimistic tone observed surrounding the partial government shutdown.

This suggests that the public remains somewhat anxious about economic conditions, with easing noted in the measures both for the current environment (down from 98.6 to 95.2) and for future expectations (down from 72.1 to 70.9). Nonetheless, the data also indicate that consumers were more upbeat to begin 2014 than they were at the start of 2013. In January 2013, consumer sentiment was just 73.8, with both individuals and businesses continuing to be downbeat in the aftermath of the fiscal cliff debate.

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

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Small Business Owner Optimism Returned to Pre-Shutdown Levels in December

The National Federation of Independent Business (NFIB) said that small business confidence increased for the second straight month, up from 92.5 in November to 93.9 in December. This means that the Small Business Optimism Index has returned to where it was in September before the government shutdown. Similar trends were seen in consumer sentiment surveys from the Conference Board and the University of Michigan.

Small firm owners ended 2013 more upbeat than they started it, with the Optimism Index up 5.9 points since December 2012. Still, it is also clear that small business confidence remains subpar, with the Optimism Index well below 100 – its threshold for stronger activity. It has not exceeded 100 since October 2006, over seven years ago. The net percentage of those taking the survey who felt that the overall economy would be better six months from now was -11 percent; however, this was better than the -20 percent in November or the -30 percent observed in January 2013.

Looking specifically at the December data, 10 percent of respondents said that the next three months were a “good time to expand,” up from 6 percent in October and 9 percent in November. Of those saying that it was not the right time for expansion, political and economic concerns were paramount. Indeed, the “single most important problem” was taxes, cited by 23 percent of those completing the survey. This was followed by government regulations (20 percent), poor sales (14 percent), and the cost of insurance (10 percent).

Despite the uptick in the headline figure, the underlying data were mostly mixed. There was a marginal increase in the percentage of small business owners planning to make capital expenditures in the next three to six months (up from 24 percent to 26 percent), and the percentage with job openings has improved over the course of the year even as it was unchanged for the month (23 percent). On the other hand, the net percentage planning to make hires in the next three months was off slightly (down from 9 percent to 8 percent), and sales and earnings data remain weak. In addition, owners continue to suggest that inventory stockpiles are “too large.”

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

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Monday Economic Report – January 6, 2014

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

The incoming data show that manufacturers ended 2013 on a high note. Despite a slight decline in December, the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) has reflected expanding manufacturing activity for seven consecutive months. Moreover, the manufacturing PMI data averaged 56.3 in the second half of 2013, a nice improvement from the 51.5 average during the first half of the year. As such, it appears that manufacturing activity has rebounded in the past few months from notable weaknesses in the spring, helping to buoy the prospects for continued growth in 2014. For instance, the real strength in the ISM report has been the new orders and production indices, both of which have exceeded 60.0—signifying healthy gains—for at least five straight months.

In a report released after Christmas, the Census Bureau reported that new durable goods orders increased 3.5 percent in November (or 1.2 percent, if you exclude the highly volatile transportation sector). From November 2012 to November 2013, sales of durable goods products rose at a strong 10.9 percent pace, and they are at their second-highest level since the end of 2007. Such findings are encouraging. At the same time, manufacturers in the Dallas and Richmond Federal Reserve Bank districts remain mostly upbeat about future activity for the sector. This was true even with some easing in new orders in both regions. More than half of the respondents to the Texas Manufacturing Outlook Survey expect increased new orders in the next six months.

Manufacturing construction spending rose 1.2 percent from $53.93 billion in October at the annual rate to $54.58 billion in November. This was the fifth straight month that construction spending has risen for the sector, increasing from $43.34 billion in June, the lowest point of the year. Over a longer time horizon, manufacturers have steadily upped their construction investment dollars after bottoming out in January 2011 at an annualized $28.84 billion pace. Overall construction activity increased 5.9 percent on a year-over-year basis, boosted significantly by the rebounding housing market. Private, residential construction activity has grown 16.6 percent since November 2012. Private, nonresidential construction spending has been stable, rising a more modest 1.0 percent year-over-year. However, nonresidential construction in the private sector has risen five months in a row, up 8.5 percent in that time frame.

Similarly, we have seen consumer confidence rebound in the latest data after falling during the federal government shutdown. Reports from both the Conference Board and the University of Michigan observed rising sentiment in December. The Conference Board’s Consumer Confidence Index increased from 72.0 in November to 78.1 in December. While this remains below the recent peak of 82.1 in June (its highest point since January 2008), it is clear that Americans have become more optimistic over the course of 2013, with the index measuring 58.4 in January. Even with these gains, consumers remain somewhat anxious about the economy, particularly with their income and job potential. The Conference Board’s key measure has not exceeded 100 since August 2007.

The Conference Board report does suggest an increased willingness to purchase homes and appliances, with automobile buying intentions improved from the summer. Similarly, personal spending growth has also made gains in the past few months, up 0.4 percent in October and 0.5 percent in November. Much of that growth stemmed from an increase in durable goods expenditures. Consumer spending has increased 3.5 percent over the past 12 months, its fastest pace of 2013 and an improvement from the 2.9 percent year-over-year rate in September.

This week, the primary focus will be the employment report due out on Friday. The consensus estimate is for roughly 200,000 nonfarm payroll jobs added in December, which would be in line with the 204,000 average per month from August to November. Likewise, manufacturers added an average of 16,500 net new workers each month over the same time frame, and they are expected to have continued to make modest hiring gains in December. The other key highlight this week will be new international trade data, which will be released tomorrow. Recent data have suggested a narrowing of the overall trade deficit, and yet, growth in manufactured goods exports has been quite slow. We hope improvements in the global economy will help to increase manufacturers’ overseas sales moving forward.

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

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