Tag: durable goods

New Factory Orders Jumped Strongly in July on Aircraft Sales, but Declined Otherwise

The Census Bureau said that new factory orders jumped 10.5 percent in July. With that said, much of that increase stemmed from nondefense aircraft orders (up from $16.8 billion in June to $70.3 billion in July), as noted in the previous release of preliminary durable goods sales figures. Commercial airplane orders are choppy, with sales usually announced in batches. Motor vehicle sales were also stronger in July, up 7.3 percent.

Excluding transportation, new factory orders declined 0.8 percent, suggesting softness in the broader market. Durable goods orders excluding transportation fell 0.7 percent, with nondurable goods sales off 0.9 percent. Despite the decline in July, demand has largely been higher since January’s winter-related decreases, and new manufacturing orders excluding transportation have risen 2.7 percent over the past six months. As such, hopefully, the July numbers are just a pause in an otherwise positive trend year-to-date.

Looking specifically at new durable goods orders in July, the data were mostly lower. This included electrical equipment and appliances (down 4.8 percent), computers and electronic products (down 1.7 percent), furniture and related products (down 1.2 percent), machinery (down 1.2 percent) and primary metals (down 0.3 percent). Outside of transportation, the only other major sector with higher sales in July was fabricated metal products, up 0.1 percent.

Meanwhile, shipments of manufactured goods increased 1.2 percent, rising for the second straight month. Since January, shipments have increased 3.7 percent, illustrating the rebound seen over the past six months after weaknesses earlier in the year. Durable goods shipments rose 3.5 percent (or 1.5 percent excluding transportation); whereas, nondurable goods shipments fell 0.9 percent.

The largest increases were in transportation equipment (up 8.1 percent), machinery (up 3.0 percent), computers and electronic products (up 2.4 percent), nonmetallic mineral products (up 1.6 percent), textile mills (up 1.6 percent) and primary metals (up 1.4 percent). In contrast, shipments of petroleum and coal products (down 3.2 percent), textile products (down 2.1 percent) and chemical products (down 1.0 percent) declined in July.

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

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Manufacturing Production Expanded More Slowly in June

Manufacturing production increased 0.1 percent in June, its slowest pace since January’s weather-induced decline. In general, manufacturers continue to expand upon the softness earlier in the year, with year-over-year growth of 3.5 percent in June, up from 1.5 percent in January. However, the year-over-year rate was slightly lower than the 3.7 percent pace experienced the month before. Similar trends were seen with manufacturing capacity utilization, which declined from 77.2 percent in May to 77.1 percent in June. While lower for the month, it still represented progress from the 75.5 percent rate seen in January.

In June, the sector-by-sector data were largely mixed, with durable goods output up 0.1 percent but nondurable goods production off by 0.3 percent. Sectors with the greatest monthly growth included furniture and related products (up 1.4 percent), fabricated metal products (up 1.2 percent), primary metals (up 1.2 percent), plastics and rubber products (up 1.2 percent), aerospace and miscellaneous transportation equipment (up 1.1 percent) and nonmetallic mineral products (up 1.0 percent).

In contrast, food, petroleum and coal products (down 2.7 percent); apparel and leather products (down 1.3 percent); beverage and tobacco products (down 0.6 percent); machinery (down 0.5 percent); and motor vehicles and parts (down 0.3 percent) had lower production in June.

On a year-over-year basis, durable goods production has risen by a healthy 5.5 percent in June, an increase from 5.4 percent observed in May. Nondurable goods activity was up a less robust 1.5 percent over the past 12 months, down from 2.1 percent the month before. The largest gains in production over the past year were seen in the following sectors: plastics and rubber products (up 7.5 percent), motor vehicles and parts (up 6.8 percent), fabricated metal products (up 6.2 percent), machinery (up 6.1 percent), furniture and related products (up 5.9 percent), primary metals (up 5.9 percent) and nonmetallic mineral products (up 5.8 percent).

Meanwhile, overall industrial production rose 0.2 percent in June, slower than the 0.5 percent increase in May. On a year-over-year basis, industrial production has grown 4.3 percent. Mining accounted for the largest jump in output, up 0.8 percent for the month and 9.7 percent year-over-year. Utility output declined for the fifth straight month, down 0.3 percent in June but up 1.8 percent year-over-year. Total capacity utilization was unchanged at 79.1 percent.

In conclusion, manufacturers continued to expand output, with the sector recovering from softness earlier in the year. Yet, growth slowed in June, and we would like to see improvements coming from a broader base of the manufacturing sector. In general, manufacturers are cautiously upbeat about production in the second half of this year, but for those projections to materialize, we need to see stronger growth in the U.S. and globally. For that reason, policymakers should focus on those initiatives which will keep the economy growing moving forward.

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

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Monday Economic Report – June 2, 2014

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

The U.S. economy contracted for the first time in three years in the first quarter of 2014. Real GDP fell 1.0 percent in the quarter, a fairly substantial revision from the earlier estimate of a gain of 0.1 percent. Much of the storyline behind these figures was the same, with consumer spending on services being the only real bright spot. Purchases of durable and nondurable goods were positive, but weather-related challenges dampened both. Weaknesses in business spending for equipment and structures, residential housing investments and reduced goods exports were all major drags on growth.

The bulk of the downward revision stemmed from lower inventory replenishment. Ironically, that could lead to more inventory spending in the second quarter with stocks running lower. In addition, other figures also point to a rebound in activity during the spring months, with my forecast for second-quarter real GDP at 3.8 percent. Still, U.S. and global growth have started off 2014 much slower than anticipated, particularly when averaging together the first and second quarters. For the year, we now expect growth of 2.3 percent, which would indicate a slight downgrade from the more optimistic outlook predicted coming out of the strong momentum during the second half of last year.

The spring rebound in the manufacturing sector can be seen in other data released last week as well, albeit with some mixed news overall. For instance, new durable goods orders rose 0.8 percent in April, building on strong growth in February and March. Nonetheless, excluding transportation, new durable goods orders were up less robustly, suggesting some broader weaknesses beyond the headline monthly figure. Moreover, new durable goods shipments declined 0.2 percent in April, even as the longer-term trend remains positive.

At the same time, regional Federal Reserve Bank surveys show a similar recovery for manufacturers, but also some easing in the latest data. Manufacturing activity in the Dallas Federal Reserve district has now expanded for 12 straight months, but the pace of growth for new orders, production, capacity and employment eased in May. The Richmond Federal Reserve’s report also observed a deceleration in sales growth; however, it also noted a pickup in shipments and hiring. Perceptions about the current business outlook were unchanged, even as conditions had improved from winter weather earlier in the year. Looking ahead six months, respondents in both Dallas and Richmond remain mostly upbeat, even if this enthusiasm was a bit weaker in May.

The two surveys also indicated a rise in pricing pressure expectations, consistent with other reports showing some higher raw material costs. Indeed, prices for personal consumption expenditures have risen 1.6 percent year-over-year, up from 0.9 percent in February and 1.1 percent in March. April’s increase stemmed largely from higher energy prices, with food costs also up modestly (but at a slower pace than the month before).

Speaking of consumer spending, Americans decreased their purchases by 0.1 percent in April following two months of healthy increases. Year-to-date, personal spending has grown 1.6 percent, with purchases up 4.3 percent over the past 12 months. Meanwhile, the two consumer confidence measures—one from the Conference Board and the other from the University of Michigan and Thomson Reuters—moved in opposite directions in May, even as they continue to reflect rising sentiment over the past few months, particularly since the government shutdown.

This week, the focus will be on jobs and trade. We will get new employment numbers for May on Friday, which we hope will build on April’s strong figures. Manufacturers have averaged just more than 13,000 workers per month since August, and the expectation is for job growth in the sector around 10,000 or so in May. The consensus forecast is for 215,000 additional nonfarm payroll workers for the month, suggesting decent hiring. On the international front, we will learn if manufactured goods exports can improve from the rather disappointing rates so far in 2014, up just 1.1 percent in the first quarter of this year relative to the same three months in 2013. Other highlights include new data on construction, factory orders, productivity and Purchasing Managers’ Index figures from the Institute for Supply Management.

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

percent change in real GDP - jun2014

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Manufacturing Production Declined in April, Following Strong Rebounds in February and March

After strong rebounds in February and March, manufacturing production declined 0.4 percent in April, according to the Federal Reserve Board. Manufacturing output has risen 1.5 percent and 0.7 percent in February and March, respectively, following a sharp decline in January related to winter storms. Even with the decrease in April, production in the sector has risen 2.9 percent over the past 12 months, down slightly from 3.1 percent in March.

Capacity utilization also eased a bit in the manufacturing sector, down from 76.9 percent in March to 76.4 percent. This brought the utilization rate back to where it was in December. On a year-over-year basis, manufacturing capacity has grown 2.1 percent.

The underlying data by sector were mixed but lower, with 12 of the 19 major sectors experiencing reduced output for the month. Durable goods and nondurable good production both declined, down 0.3 percent and 0.4 percent, respectively.  The largest monthly declines were seen in the machinery (down 1.6 percent), petroleum and coal products (down 1.6 percent), primary metals (down 1.6 percent), furniture and related products (down 1.2 percent), and plastics and rubber products (down 1.0 percent) sectors.

In contrast, areas with increased production in April included aerospace and miscellaneous transportation (up 1.3 percent), nonmetallic mineral products (up 0.5 percent), wood products (up 0.4 percent), apparel and leather (up 0.2 percent), and motor vehicles and parts (up 0.1 percent). Looking at broader categories, production in both energy (down 1.2 percent) and high-technology industries (down 0.2 percent) were lower.

While manufacturing activity in April was slightly disappointing, it is important to note that output continues to reflect modest gains year-over-year, particularly for durable goods firms (up 4.3 percent). Nondurable goods activity has declined 0.35 percent, however, over the past 12 months. The largest year-over-year gains were in the apparel and leather (up 7.5 percent), motor vehicles and parts (up 6.8 percent), nonmetallic mineral products (up 6.0 percent), machinery (up 5.0 percent), and wood products (up 4.9 percent).

Meanwhile, overall industrial production declined 0.6 percent in April, following 0.9 percent and 1.1 percent gains in February and March. Mining activity (up 1.4 percent) increased for the second straight month, but this was offset by declines in manufacturing (see above) and utilities (down 5.3 percent). Industrial production rose 3.5 percent between April 2013 and April 2014, reflecting modest gains, but this was down from a 3.9 percent pace the month before. Capacity utilization was lower, as well, down from 79.3 percent to 78.6 percent.

In conclusion, the U.S. economy has started 2014 at a much slower pace than anticipated, particularly given the strong momentum seen at the end of 2013. While manufacturers have begun to rebound from winter-related softness earlier in the year, it remains clear that output growth has not fully recovered to the pace seen just a few months ago.

We remain hopeful for the demand and production to accelerate in the coming months, but April’s decline in activity shows just how fragile our recovery has been. Manufacturers are cautiously optimistic about increased activity this year, but there is also nervousness that such progress will be fleeting, much as it has in previous years. We can’t afford to continue the “one step forward, two steps back” trend – it is costing us the ability to truly compete in the global economy – policymakers must combat that trend with pro-growth measures that allow manufacturers to make sustained investments and grow their businesses.

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

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Manufacturing Labor Productivity Improved in the First Quarter, but Activity Weakened

The Bureau of Labor Statistics said that labor productivity in the manufacturing sector improved in the first quarter. Manufacturing labor productivity rose 3.3 percent in the first quarter, up from 1.3 percent in the fourth quarter and higher than the 2.3 percent average for 2013. Yet, the negative impact of weather can also be seen in this data, with the pace of manufacturing output growth declining from 4.7 percent to 1.8 percent. The fact that total hours decreased 1.4 percent in the first quarter was even more telling of this. As a result of weaker activity, unit labor costs eked out a 0.1 percent increase.

Breaking this data down by sector, labor productivity for durable goods manufacturers outpaced their nondurable goods peers, up 3.6 percent versus 2.5 percent, respectively. The larger impact of weather was seen in the durable goods industry, with hours falling 1.9 percent in the first quarter and output growth decelerating from 6.9 percent in the fourth quarter to 1.6 percent in the first quarter. Nondurable goods output rose 2.0 percent. Still, unit labor costs were slightly lower for durable goods businesses (down 0.1 percent), with nondurable goods unit labor costs up 0.4 percent.

Looking at longer-term trends, we continue to see one of the reasons why manufacturing in the U.S. has become more attractive in recent years. Since the end of 2009, unit labor costs for manufacturers have fallen 3.3 percent, with durable goods unit labor costs off 12.1 percent over that time frame. These figures help to keep U.S. manufacturers more competitive globally.

In the larger economy, nonfarm labor productivity declined 1.7 percent in the first quarter, following three consecutive quarters of decent growth. Output rose a paltry 0.3 percent, down from the much stronger growth rate of 3.8 percent in the fourth quarter. Therefore, unit labor costs were up 4.2 percent for the quarter. In 2013, nonfarm labor productivity rose 0.5 percent, with output up 2.2 percent and unit labor costs up 1.1 percent.

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

productivity

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New Factory Orders Were Strong in March, Led by Durable Goods Growth

The Census Bureau said that new factory orders rose 1.1 percent in March, extending the 1.5 percent gain of February. This was a sign that manufacturers were beginning to recover from declines in both December and January. Yet, it was largely the result of sharp increases in sales for durable goods, up 2.9 percent. This report was consistent with the advance data released earlier, with higher auto and nondefense aircraft sales skewing the headline figure upward. Excluding transportation, new factory orders would have risen a more modest 0.6 percent.

In contrast to the stronger durable goods data, nondurable goods orders declined 0.6 percent in March, somewhat offsetting the 0.9 percent increase observed in February.

Looking specifically at new durable goods orders in March, the data were positive across-the-board. Areas with increased sales for the month included computers and electronic products (up 5.3 percent), electrical equipment and appliances (up 4.0 percent), machinery (up 2.7 percent), fabricated metal products (up 2.0 percent), primary metals (up 1.9 percent), and furniture and related products (up 1.4 percent).

Meanwhile, manufactured goods shipments were up 0.3 percent in March, a bit slower than the 0.9 percent rebounded pace of February. Still, it was the second straight monthly gain in shipments, which was notable. Similar to the new orders figures, however, shipments were lifted by strength in durable goods (up 1.2 percent), with nondurable goods shipments off 0.6 percent.

Sectors with the largest increases in monthly shipments included beverage and tobacco products (up 2.8 percent), machinery (up 2.2 percent), transportation equipment (up 1.5 percent), computer and electronic products (up 1.4 percent), electrical equipment and appliances (up 1.1 percent), and wood products (up 1.1 percent), among others. These were offset to some extent by declines in petroleum and coal products (down 2.8 percent), textile products (down 0.7 percent), leather and allied products (down 0.2 percent), and chemical products (down 0.1 percent).

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

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Manufacturers Made Outsized Gains to Real GDP Growth in 2013

Starting today, the Bureau of Economic Analysis will release real GDP data by industry on a quarterly basis. This allows us to see which industries were responsible for the changes in real output made in any specific quarter. While this data has a bit of a lag – being released within 30 days after the third estimate of real GDP activity – it will provide business leaders, academics, analysts, and politicians with more data on what is moving the U.S. economy.

For manufacturers, the news was mostly positive, showing numerically what we have often just surmised from the regular release. For instance, the manufacturing sector contributed 0.40 percentage points to the 1.9 percent growth in real GDP in 2013. This suggests that manufacturers contributed just over 21 percent of the growth in the economy last year, which is pretty impressive given that the sector accounts for just 12.5 percent of real GDP. It indicates that manufacturing made outsized gains to the economy last year, which both reflects the softness of the overall real GDP figure and the significant spillover effects from manufacturing.

Value-added from manufacturing increased from $2.03 trillion in 2012 to $2.08 trillion in 2013. In the fourth quarter of 2013, value-added from the sector was $2.14 trillion, or $1.12 trillion and $1.01 trillion from durable and nondurable goods sectors, respectively. (The numbers reflect some rounding error.)

Last month, we learned that real GDP in the fourth quarter rose 2.6 percent. This release breaks that number down further, with private sector growth of 3.5 percent and government down 2.0 percent. Real value-added from manufacturers increased 10.4 percent at the annual rate in the fourth quarter, with durable and nondurable goods activity up 3.5 percent and 18.6 percent, respectively. For 2013, value-added growth was stronger for nondurable goods (up 5.3 percent) than for durable goods (up 1.0 percent).

Next week, we will get our first look at real GDP growth for the first quarter of 2014. Winter storms and weak export markets are expected to take a toll, with the consensus expectation of around 1.5 percent. Still, the range of forecasts spans from around 1.2 percent to 2.0 percent, and I would not be surprised if it comes in a bit higher than consensus on rebounding March data, perhaps around 1.8 percent.

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

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California’s Manufacturing Sector Expected to Improve in the Second Quarter

Manufacturing activity in California is expected to improve in the second quarter, according to the A. Gary Anderson Center for Economic Research at Chapman University. The composite purchasing managers’ index (PMI) increased from 56.2 in the first quarter (January) to 58.5 in the second quarter (April). Indeed, manufacturers largely anticipate increased paces for production (up from 60.5 to 64.4) and new orders (up from 55.8 to 60.9). Roughly half of the respondents in the survey said that they thought sales and output would be higher in the second quarter.

Employment growth remained soft (down from 55.6 to 53.3). Looking at the specific responses, 24.1 percent felt that their employment levels would increase in the second quarter, with 11.4 percent saying that it would be lower. However, the bulk of responses (64.5 percent) said that their hiring levels would be unchanged for the quarter. One positive, of course, was that net hiring was positive, albeit only modestly so.

The PMI for nondurable goods (up from 56.7 to 58.2) advanced more than the one for durable goods industries (up from 58.1 to 58.3), which increased only marginally. Each was lower than it was one year ago, however, when durable and nondurable goods firms had index values of 60.3 and 60.9, respectively.

Overall, these data show that manufacturers in California see demand and production picking up this quarter. That is a good thing, but it is also worth noting that the pace of growth remains below the pace observed in mid-2013. Moreover, manufacturers in Orange County were less positive this quarter than in the last (down from 64.1 to 58.5) on slower new order and employment growth.

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

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New Factory Orders Rebounded in February from Softness in December and January

The Census Bureau said that new factory orders increased 1.6 percent in February, recovering somewhat from the sharp declines in both December and January. This was consistent with the advance data provided on durable goods the week before, with the sector rebounding from winter weather slowness. New manufactured goods orders have risen from $482.7 billion in August to $488.8 billion in February, an increase of 1.3 percent.

New durable goods orders rose 2.2 percent for the month, lifted by strong sales growth for motor vehicles and aircraft. Excluding transportation, manufacturing orders were up 0.7 percent, with durable goods edging only marginally higher in February, up just 0.1 percent. At the same time, new nondurable manufactured goods increased by 1.0 percent.

Looking specifically at new durable goods orders in February, the data were largely mixed. Areas of strength included transportation equipment (up 7.0 percent), primary metals (up 1.7 percent), fabricated metal products (up 0.4 percent), computers and electronic products (up 0.2 percent), and furniture and related products (up 0.2 percent). But, these were offset by reduced new orders for electrical equipment and appliances (down 1.3 percent) and machinery (down 1.2 percent).

Meanwhile, manufactured goods shipments were up 0.9 percent, also rebounding after lower data in both December and January. Durable and nondurable goods shipments rose 0.8 percent and 1.0 percent, respectively. On a year-over-year basis, shipments have grown from $489.5 billion in February 2013 to $493.5 billion, up 0.8 percent.

Sectors with the largest increases in monthly shipments included textile products (up 4.9 percent), petroleum and coal products (up 2.0 percent), machinery (up 1.7 percent), nonmetallic mineral products (up 1.7 percent), transportation equipment (up 1.5 percent), apparel (up 1.4 percent), and plastics and rubber products (up 1.0 percent). In contrast, there were declining shipments in the following areas: leather and allied products (down 1.6 percent), computers and electronic products (down 1.4 percent), beverage and tobacco products (down 0.7 percent), electrical equipment and appliances (down 0.5 percent), printing (down 0.3 percent), and wood products (down 0.3 percent).

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

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New Factory Orders Were Down for the Second Straight Month in January

The Census Bureau said that new factory orders declined for the second straight month, down 2.0 percent and 0.7 percent in December and January, respectively. This was not a surprise, particularly given the already-released estimates for durable goods orders and the recent challenges with weather. Much of the decline in January stemmed from reduced auto and defense aircraft sales. As such, new factory orders excluding transportation increased 0.2 percent, indicating a very modest rebound from the 0.1 percent decline the month before.

New durable and nondurable manufactured goods orders were both lower in January, down 1.0 percent and 0.4 percent, respectively. With that said, as noted above, durable goods excluding transportation rose 0.1 percent, indicating broader strength than the headline figure might suggest. Areas of strength in the durable goods sector included fabricated metal products (up 7.4 percent) and computers and electronics (up 3.7 percent). But, these were somewhat offset by reduced new orders for furniture and related products (down 3.6 percent), electrical equipment and appliances (down 2.2 percent), primary metals (down 1.2 percent), and machinery (down 0.7 percent).

Meanwhile, manufactured goods shipments were also lower for the second consecutive month, with declines of 0.3 percent in both December and January. Durable goods shipments were off by 0.3 percent, with nondurable goods down 0.4 percent. Negative weather influences can be seen in this data, particularly to the extent that consumers were not able to get the stores to make purchases.

Sectors with the largest declines in monthly shipments included textile products (down 11.4 percent), textile mills (down 3.8 percent), machinery (down 2.9 percent), automobiles (down 1.8 percent), apparel (down 1.0 percent), and chemical products (down 1.0 percent). In contrast, there were increased shipments observed in the following areas: electrical equipment and appliances (up 1.5 percent), nonmetallic mineral products (up 1.3 percent), food products (up 1.2 percent), computers and electronics (up 0.7 percent), and wood products (up 0.7 percent).

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

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