The Richmond Federal Reserve Bank said that manufacturing activity in its district picked up somewhat in June, bouncing back from May’s more-sluggish expansion. The composite index of general business activity rose from 1 in May to 7 in June. While the sector has grown for eight straight months in the region, activity has eased from March’s seven-year high (22). Manufacturers in the mid-Atlantic area were more optimistic about new orders (up from zero to 6), shipments (up from -2 to 11) and capacity utilization (up from -9 to 1). Hiring (down from 6 to 5) has expanded in every month so far in 2017, albeit at a slower pace than in February and March. Despite those mostly positive trends, the backlog of orders (up from -15 to -4) and the average workweek (down from -3 to -5) remained in contraction territory in June. Read More
The Dallas Federal Reserve Bank reported that manufacturing activity accelerated in June for the ninth straight month, but the pace of growth slowed a little. The composite index of general business activity decreased from 17.2 in May to 15.0 in June. Overall, the data reflect some progress in the Texas economy, with the headline index jumping from an average of 4.0 in the second half of 2016 to 18.8 in the first half of 2017. The sample comments reflect improvements relative to this time last year, but they also admit that activity has weakened more recently – although still positive. Respondents once again noted difficulties in identifying qualified workers, especially as the labor market has tightened. Read More
The IHS Markit Flash Eurozone Manufacturing PMI rose from 57.0 in May to 57.3 in June, once again its fastest pace since April 2011. This suggests that manufacturers in Europe have mostly brushed off political uncertainties, with economic growth on the continent continuing to trend in the right direction. New orders (up from 57.8 to 58.5) and output (up from 58.3 to 58.5) accelerated somewhat in June, with both at levels not seen since early 2011. At the same time, exports (down from 57.5 to 57.4) and employment (down from 56.1 to 56.0) edged lower for the month but remained encouraging overall. Looking ahead six months, the future output index reflected healthy expectations moving forward (up from 66.0 to 67.3), with that measure at its highest point since it was introduced in mid-2012. In addition to data for Europe as a whole, IHS Markit also released preliminary figures for France (up from 53.8 to 55.0) and Germany (down from 59.5 to 59.3), which were both promising despite mixed results in June.
Meanwhile, the IHS Markit Flash U.S. Manufacturing PMI eased to its slowest growth rate since September, down from 52.7 in May to 52.1 in June. It was the fifth consecutive monthly decline, down from 55.0 in January, which was the fastest growth rate in nearly two years. Nonetheless, we continue to see modest growth overall in the sector nationally, even with some softer data in most of the key variables, including new orders (down from 53.4 to 51.6), output (down from 53.3 to 52.9) and exports (down from 51.3 to 51.0). In contrast to those figures, hiring picked up somewhat in June (up from 51.9 to 52.4). While manufacturing activity in the United States was perhaps weaker than desired in this latest survey, respondents continued to be mostly optimistic about future output (down from 66.5 to 66.1), even with a slight easing in this report.
The Kansas City Federal Reserve Bank said that manufacturing activity expanded for the seventh straight month and continued to expand at a modest pace in June. The composite index of general business conditions increased from 8 in May to 11 in June, its highest reading since March’s six-year high (20). In general, manufacturers report notable improvements in activity relative to this time last year, even as sentiment has pulled back somewhat from stronger numbers at the beginning of 2017. Encouragingly, several of the key indices in May shifted strongly higher, including shipments (up from 3 to 23), production (up from -1 to 23), employment (up from 11 to 15) and the average workweek (up from 1 to 7). A couple of the sample comments cited difficulties in hiring new workers. On the other hand, new orders (down from 9 to 4) and export orders (down from 4 to 3) slowed a little in this report but remained positive indicators. Read More
The Federal Reserve Bank of Philadelphia said that manufacturing activity expanded strongly in June once again. The composite index of general business activity decreased from 38.8 in May to 27.6 in June. To illustrate this recent progress, the headline index has averaged 31.4 through the first half of 2017, peaking at 43.3 in February, which was the best reading since November 1983. For comparison purposes, the average in the second half of 2016 was 9.1. In fact, growth in new orders (up from 25.4 to 25.9) accelerated in June, with nearly 45 percent of survey respondents saying that demand had risen since May. At the same time, other measures softened a bit in this release, even as they continued to expand at decent rates. Those included shipments (down from 39.1 to 28.5), employment (down from 17.3 to 16.1) and the average workweek (down from 21.7 to 20.5). Read More
The Empire State Manufacturing Survey said that manufacturing activity bounced back in June after softening in May. The composite index of general business conditions rose from -1.0 in May, its first decline in nine months, to 19.8 in June, its fastest pace since September 2014. The strong rebound was buoyed by healthy accelerations in new orders (up from -4.4 to 18.1), shipments (up from 10.6 to 22.3) and the average workweek (up from 7.5 to 8.5). The percentage of respondents saying that orders had increased in the month rose from 20.7 percent in May to 35.1 percent in June. At the same time, hiring (down from 11.9 to 7.7) slowed somewhat, even as growth in employment remained modest. The labor market has generally improved, up in four of the past six months after contracting sharply in the ten months prior to that. Read More
The Federal Reserve said that manufacturing production fell for the second time in the past three months, down 0.4 percent in May. After rebounding strongly in April, up 1.1 percent, this latest figure is a bit of a disappointment, suggesting a softening of activity following recent progress. Motor vehicles and parts production led the decline in May, down 2.0 percent for the month and off 1.5 percent year to date, as automotive demand has continued to be weaker than desired so far in 2017. Despite the easing in this latest release and some lingering challenges, the underlying data remain consistent with a manufacturing sector that has turned a corner and has moved in the right direction, especially relative to where it stood at this point last year.
Manufacturing production has risen 1.4 percent over the past 12 months, down from 1.6 percent in the previous report. Yet, it was the seventh consecutive positive year-over-year reading for manufacturing output and definite progress from the 0.3 percent year-over-year decline in May 2016. Similarly, manufacturing capacity utilization declined from 75.8 percent in April to 75.5 percent in May. For comparison purposes, utilization in the sector was 75.0 percent one year ago.
The Federal Open Market Committee (FOMC) voted to raise short-term interest rates at the conclusion of its June 13–14 meeting for only the third time since the financial crisis. After hiking the federal funds rate in December and March, the Federal Reserve increased rates by another 25 basis points, with a new target range of 1 to 1.25 percent. In making this decision, participants noted recent strengthening in the overall macroeconomy, including better data for consumer spending, business investment and hiring. Beyond this latest action, it is widely anticipated that the FOMC will increase rates one more time in 2017, perhaps as soon as its September 19–20 meeting. Such a decision, of course, would depend on continued improvements in economic activity, especially as the Federal Reserve remains “data dependent.” At this meeting, there was one dissenter: Minneapolis Federal Reserve Bank President Neel Kashkari, who felt that incoming data did not warrant an increase just yet. Read More
The National Federation of Independent Business (NFIB) said that the Small Business Optimism Index was flat in May, remaining at 104.5 for the second month. Sentiment among owners has remained highly elevated over the course of the past six months despite easing from January’s 105.9 reading, which was a 12-year high. Over that six-month period, the headline index has averaged 105.1. For comparison purposes, the index was 93.8 one year ago, illustrating the sizable uptick in confidence among small business leaders since November. Along those lines, the percentage of respondents suggesting that the next three months would be a “good time to expand” edged down from 24 percent to 23 percent, which was the average seen over the past six months. In May 2016, just 9 percent said the same thing. Read More
The Census Bureau said that private manufacturing construction spending pulled back once again in April, down 1.9 percent. The value of construction put in place in the sector declined from $69.19 billion in March to $67.84 billion in April, its slowest pace since October 2014. (December 2016’s $67.87 billion was not far off from that threshold.) To further illustrate the recent deceleration in activity, construction spending in the sector has averaged just $68.40 billion over the past five months (December to April), down from $75.51 billion in the prior five months (July to November). While manufacturing construction has trended mostly higher over the past few years, activity has moved lower since achieving the all-time high of $82.15 billion in September 2015. Nonetheless, we would expect a turnaround in construction activity in the coming months, especially in light of the improved outlook of late. Read More