economic outlook


Manufacturing Construction Activity Remained Cautious in October

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The Census Bureau said that private manufacturing construction spending remained cautious in October, pulling back for the second straight month. The value of construction put in place in the sector declined from $75.19 billion in September to $73.37 billion in October, down 2.4 percent for the month. While manufacturing construction has trended higher in the past two or three years, largely from increased investment in the chemical sector, activity has stalled more recently as the sector has grappled with sluggish growth and economic and political anxieties. Along those lines, construction activity in the manufacturing sector has pulled sharply lower since achieving the all-time high of $82.15 billion in September 2015. Read More


ISM: Manufacturing Production in November Expanded at Fastest Clip since July 2015

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The Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) rebounded once again in November, growing at a five-month high. The composite index rose from 51.9 in October to 53.2 in November, expanding for the third straight month. This is encouraging for a sector that has seen subpar growth over much of the past two years on global headwinds and economic anxieties. Indeed, manufacturing production (up from 54.6 to 56.0) in November expanded at its fastest clip since July 2015, with new orders (up from 52.1 to 53.0) also accelerating slightly. Exports (down from 52.5 to 52.0) and employment (down from 52.9 to 52.3) slowed a little for the month but remained positive, with hiring expanding for only the third time this year so far.

Overall, manufacturers appear to be more upbeat in their assessments of the economy and about demand. The sample comments tend to echo this. One computer and electronic products leader reported, “Strong manufacturing numbers in anticipation of strong year-end bookings.” Other comments also mirrored that positive trend, describing activity as “steady” or “consistent” or “good.” Read More

Conference Board: Consumer Confidence Rose to Its Highest Level since July 2007

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Consumer confidence soared in November to its highest level since July 2007, according to the Conference Board, bouncing back from a pre-election lull in the October report. The Consumer Confidence Index jumped from 100.8 in October to 107.1 in November. This mirrored a similar post-election rise in sentiment seen in the competing survey from the University of Michigan and Thomson Reuters. More importantly, it represented a significant improvement in Americans’ assessments of the economy since May’s dismal 92.4 reading. The underlying data noted progress in the public’s perceptions about both current (up from 123.1 to 130.1) and future (up from 86.0 to 91.7) conditions. The measure for the present economic environment was also its loftiest level since July 2007, with the expectations index reaching a 17-year high. As noted in the press release, this report should serve as good news for retailers – and by extension, manufacturers – for the holidays. Read More


Strong Consumer Spending Revised Real GDP Growth Higher, Up 3.2% in the Third Quarter

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The Bureau of Economic Analysis said that strong consumer spending helped push real GDP growth higher, with real GDP growth revised up to 3.2 percent in the third quarter. It was originally estimated to be 2.9 percent growth, and both figures were the fastest quarterly growth rate in two years. Overall, this report was good news. With the U.S. economy expanding by only 1.1 percent at the annual rate in the first half of 2016, the third quarter numbers were entirely welcome, especially for consumer spending and net exports. Business investment remains a concern, but hopefully recovers moving forward with improvement confidence. In the end, real GDP will grow by 1.6 percent in 2016, but I expect stronger activity next year, with the current forecast being 2.5 percent growth. Read More

Markit: U.S. Manufacturing Output in November Grew at Strongest Rate since March 2015

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The Markit Flash U.S. Manufacturing PMI rose from 53.4 in October to 53.9 in November, a 13-month high. More importantly, output grew at its strongest rate since March 2015 (up from 55.3 to 56.0), a sign that U.S. manufacturing activity has continued to stabilize from softness earlier in the year. Indeed, the headline index bottomed out in 2016 at 50.7 in May, and it has averaged 52.0 year-to-date through the first 11 months. Beyond production, other key indices were also stronger in November, including new orders (up from 54.7 to 55.5), exports (up from 50.9 to 51.0) and hiring (up from 51.6 to 52.4). Overall, this report provides some encouragement for manufacturers, many of whom have been rather cautious in their economic outlook for much of the past two years.

Meanwhile, the Markit Flash Eurozone Manufacturing PMI increased from 53.5 to 53.7, its fastest pace since January 2014. As such, the continent’s economy continues to move in the right direction, with activity accelerating at a modest pace. Overall, the headline PMI has trended higher since bottoming at earlier in the year at 51.2 in February. New orders (up from 53.8 to 54.5) and exports (up from 53.4 to 54.1) were both stronger in this report. Yet, output (down from 54.6 to 54.1) and employment (down from 53.7 to 53.5) each pulled back a little in this survey despite expanding at a still-decent rate. In addition, manufacturers in Germany (down from 55.0 to 54.4) and France (down from 51.8 to 51.5) also reported some easing in growth in November, even as the underlying data continues to be quite positive for both.

Richmond Fed: Manufacturers Experienced a Modest Rebound in Activity in November

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The Richmond Federal Reserve Bank said that manufacturing activity in its district rebounded modestly in November after contracting in four of the prior five months. The composite index of general business activity increased from -4 in October to 4 in November. The shift in this month’s report came largely from better new orders (up from -12 to 7) data, with shipments (down from 2 to 1) also expanding ever-so-slightly. At the same time, there are lingering weaknesses seen in indices for the backlog of orders (down from -11 to -12) and capacity utilization (up from -5 to -1). Beyond those measures, the labor market data were promising. Hiring (up from 3 to 5) accelerated for the second consecutive month, and the average workweek (up from -3 to 4) widened again. Read More

Kansas City Fed: Manufacturing Activity Slowed in November but Continued to Expand Slightly

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The Kansas City Federal Reserve Bank said that manufacturing activity slowed in November but continued to expand ever-so-slightly. The composite index of general business conditions declined from 6 in October to 1 in November; yet, it was also the third straight month with this measure positive after two years of struggles. Indeed, manufacturers in the district have faced tremendous challenges due to global headwinds and reduced commodity prices, especially for crude oil. The underlying data in November mirrored the headline figure, with easing expansions for new orders (down from 14 to 6), production (down from 18 to 9) and shipments (down from 20 to 7). Export growth (down from 3 to zero) was stagnant in November after slightly improving in October for the first time since January. Read More

Philly Fed: Manufacturing Activity Expanded for the Fifth Time in the Past Six Months

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The Federal Reserve Bank of Philadelphia said that manufacturing activity expanded for the fifth time in the past six months. The composite index of general business activity declined from 9.7 in October to 7.6 in November. This marks notable improvement for manufacturers after weaknesses last year and in the spring months. Despite the easing in this month’s headline number, both new orders (up from 16.3 to 18.6) and shipments (up from 15.3 to 19.5) were higher in November. The percentage of respondents saying that new orders were lower for the month declined from 24.1 percent in October to 17.7 percent in November, with the largest shift among those saying that there was no change in sales, up from 33.7 percent to 45.9 percent. Read More


Manufacturing Production Expanded Modestly in October for the Second Straight Month

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The Federal Reserve said that manufacturing production expanded modestly for the second straight month. Output in the sector was up 0.2 percent in October, which was the same as seen in September and consistent with consensus expectations. Despite the increase, manufacturers continue to grow at a much slower pace than desired. Along those lines, manufacturing production was down 0.2 percent on a year-over-year basis. Manufacturers have struggled to increase demand over the past couple years, with a strong dollar and global headwinds dampening overall activity. Indeed, manufacturing capacity utilization inched up from 74.8 percent to 74.9 percent, but that remained well below the 75.6 percent utilization rate seen one year ago. Read More

New York Fed: Manufacturers Reported a Slight Expansion in November

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The Empire State Manufacturing Survey said that manufacturing activity expanded somewhat in November, rebounding after three straight months of declines. The composite index of general business conditions increased from -6.8 in October to 1.5 in November. The stabilization in activity in the New York Federal Reserve Bank’s district stemmed from improvements in new orders (up from -5.6 to 3.1) and shipments (up from -0.6 to 8.5). Nearly one-third of respondents reported higher sales in November, up from 26.7 percent in October. That was an encouraging sign for a sector that has been significantly challenged over the past two years. Yet, it was not all good news. Employment continued to lag behind, with indices for the number of employees (down from -4.7 to -10.9) and the average employee workweek (down from -10.4 to -10.9) still in strong contraction territory. That suggests that firms remain quite cautious for now, even with better demand figures. Read More