economic outlook


Retail Spending Cooled in July after Strong Gains in the Second Quarter

By | Economy, Shopfloor Economics | No Comments

The Census Bureau said that retail sales cooled in July after strong gains in the second quarter. Sales were unchanged in July, with Americans pausing in their consumer spending growth after jumping 0.8 percent in June. This suggests that the public was more cautious in July, likely on uncertainties in the global economy and some soft economic data. Retail sales have risen 2.3 percent over the past 12 months, a modest pace but down from 3.0 percent in the prior report. To be fair, gasoline station sales have fallen 11.0 percent year-over-year on reduced prices, pulling the headline number lower. Excluding gasoline, retail sales were up 3.5 percent year-over-year, suggesting that consumers have increased their purchases at a fairly decent pace over the past year. Read More

NFIB: Small Business Sentiment Ticked Higher Again in July

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The National Federation of Independent Business (NFIB) said that sentiment among small business owners ticked higher in in July. The Small Business Optimism Index rose marginally from 94.5 in June to 94.6 in July, its highest level since December. It marked some continued improvement from March’s two-year low in optimism, even as small firms continue to be concerned about the overall economic outlook. As a sign of this caution, the percentage suggesting that the next three months would be a “good time to expand” remained unchanged at 8 percent, down from 10 percent in January and 12 percent one year ago, with economic conditions and the political climate cited by those saying that it would not be a good time for expansion. Read More


The July Jobs Numbers Were Relatively Strong for the Second Straight Month

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For the second straight month, job numbers in the U.S. economy were relatively strong, with each above the consensus estimate. Nonfarm payrolls rose by 255,000 in July, extending the gain of 292,000 seen in June. As a result, the country has averaged 273,500 net new workers over the past two months, a decent jump over the 151,000 average seen over the first five months of 2016. This suggests that employers have begun to hire again despite continued cautiousness and lingering weaknesses in the global macroeconomy. The unemployment rate was unchanged at 4.9 percent. Yet, the so-called real unemployment rate – which includes discouraged workers, the underemployed and those working part-time for economic reasons – increased from 9.6 percent to 9.7 percent.

In the manufacturing sector, employers added 9,000 workers in July. This followed an increase of 15,000 in June, and like the nonfarm payroll numbers, it was an encouraging sign. With that said, manufacturing employment has declined by 15,000 on net year-to-date, suggesting that softness in demand and production in the sector have dampened hiring activity of late. Hopefully, employment growth for manufacturers continues to tick higher moving forward – something that is likely to happen if the sector continues to stabilize. Since the end of the Great Recession, manufacturers have added 852,000 workers. Read More


Manufacturing Construction Slowed to an 18-Month Low in June

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The Census Bureau said that private manufacturing construction spending slowed to an 18-month low in June, reflecting ongoing cautiousness in the sector. The value of construction put in place declined from $73.94 billion in May to $70.58 billion in June, down 4.5 percent for the month and slipping to its lowest level since December 2014. Since achieving the all-time high of $82.15 billion in September 2015, construction activity in the manufacturing sector has pulled sharply lower. On a year-over-year basis, manufacturing construction spending has fallen 10.4 percent, down from $78.76 billion in June 2015.

Yet, the longer-term trend has been a positive one, boosted in particular by increased investments in the chemical sector, which continues to benefit from cost advantages in the energy sector. To illustrate this growth, manufacturing construction has risen by 25.3 percent over the past 24 months. Read More


Real GDP Growth Disappointed in the Second Quarter

By | Economy, Shopfloor Economics, Shopfloor Main | No Comments

The latest gross domestic product (GDP) numbers confirm that the U.S. economy remains mired in slower-than-desired growth despite recent signs of progress in some data points. Real GDP grew just 1.2 percent in the second quarter, well below the consensus estimate of 2.6 percent, with first quarter growth revised down to 0.8 percent. This release reflects a rebound in consumer spending, but there were significant drags on activity from fixed investment and inventories. Indeed, manufacturers and other business leaders continue to be quite cautious, and as a result, they are holding back on capital spending and hiring, waiting for better signs of traction in the economy.

The U.S. economy has averaged 2.2 percent growth annually since the end of the Great Recession, and with this release, real GDP is likely to expand by 1.8 percent in 2016. That would, however, suggest a better second half of the year, as real GDP grew just 1.0 percent at the annual rate in the first half. With that in mind, we need policymakers – especially in this all-important election year – to focus on pro-growth measures that will spur stronger activity. Read More

regional Fed

Kansas City Fed: Manufacturing Activity Contracted Again in July

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After slightly expanding for the first time since January 2015 in June, manufacturing activity in the Kansas City Federal Reserve Bank’s district contracted once again in July. The composite index of general business conditions dropped from 2 in June to -6 in July. This region has been challenged for much of the past two years by pullbacks in the energy sector and the stronger U.S. dollar, and the sample comments suggest that post-Brexit anxieties might have lowered sentiment in this release’s data. New orders (down from 4 to -5), production (down from 12 to -15) and shipments (down from 10 to -17) all returned to negative territory for the month. One-third of all respondents saying that their sales were lower in July, with 28 percent suggesting that sales were higher and 37 percent noting no change. At the same time, the rate of decline somewhat for both hiring (down from -4 to -5) and exports (down from -1 to -7). Interestingly, the average workweek (up from 1 to 7) widened in this report. Read More

Richmond Fed: Manufacturing Activity Improved in July after a Weak June

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The Richmond Federal Reserve Bank said that manufacturing activity in its district improved in July after weakening once again in June. The composite index of general business activity rebounded from -10 in June, its lowest reading since January 2013, to 10 in July. Indeed, the underlying data recovered across-the-board in this report, including new orders (up from -17 to 15), shipments (up from -8 to 7), capacity utilization (up from -11 to 3) and the average workweek (up from -7 to 1). In addition, manufacturers in the region accelerated their employment growth (up from 1 to 6) somewhat. Each of these indices were encouraging. Yet, this report has been highly volatile so far this year from month-to-month, with the headline number ranging from -10 in June to 17 in March. Hopefully, the expansion seen in July can be sustained moving forward. Read More

Dallas Fed: Manufacturing Conditions Stabilized Somewhat in July, but Continued to Contract

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The Dallas Federal Reserve Bank said that manufacturing activity in its Texas district stabilized somewhat in July, even as sentiment has now contracted for 19 straight months. The composite index of general business conditions increased from -18.3 in June to -1.3 in July, bringing this measure closer to neutral territory. This shift was mirrored by better production (up from -7.0 to 0.4), capacity utilization (up from -9.3 to 0.3), shipments (up from -8.6 to 0.1) and capital expenditures (up from -2.1 to 4.8), with each index expanding slightly in July. As such, this release represented some progress for a state that has grappled with lower energy prices and the strong dollar over the past couple years. Read More

Philly Fed: Manufacturing Activity Improved Despite Another Contraction in the Composite Index

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The Federal Reserve Bank of Philadelphia said that manufacturing sentiment in July contracted for the third time in the past four months (or the ninth time in the past 11 months). The composite index of general business activity declined from 4.7 in June to -2.7 in July. It is likely that post-Brexit worries negatively impacted assessments about the broader economy. Despite a decrease in the headline number, many of the underlying data points improved for the month. For instance, both new orders (up from -3.0 to 11.8) and shipments (up from -2.1 to 6.0) returned to expansion territory in July, which was encouraging. Indeed, the percentage of respondents suggesting that orders had increased for the month rose from 20.6 percent in June to 27.6 percent in July, with those noting declining sales dropping from 23.6 percent to 15.8 percent. Read More

NY Fed: Manufacturing Activity Slowed to a Crawl in July

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The Empire State Manufacturing Survey said that manufacturing activity slowed to a crawl in July after rebounding in June. The composite index of general business conditions declined from 6.0 in June to 0.6 percent in July. On the positive side, the headline index had been -9.0 in May, suggesting some progress over the past couple months even if growth remained less than desired. The underlying data were generally weaker in this report, including new orders (down from 10.9 to -1.8) and shipments (down from 9.3 to 0.7). Nearly 29 percent of respondents in this survey said that orders were higher in July, down from 34.2 percent in June; conversely, the percentage stating decreased orders rose from 23.2 percent to 30.8 percent for the month. The labor market data continued to be discouraging. Hiring (down from zero to -4.4) and the average employee workweek (down from -5.1 to -5.5) were both negative. Read More