Tag: employment

ISM: Headline Number Unchanged at 51.5, but Orders and Production Rebounded a Little

The Institute for Supply Management’s (ISM) manufacturing purchasing managers’ index (PMI) was unchanged at 51.5 in April. On the positive side, manufacturing activity has continued to expand very modestly, and yet, these data reflect softness in the market seen over the past few months. Six months ago, for instance, the PMI value was 57.9, and this headline number has trended lower since then. Demand and output have shifted into a lower gear on challenges from a stronger U.S. dollar, reduced crude oil prices, residual impacts from the West Coast ports slowdown, and other factors. The sample comments note that these headwinds were top-of-mind for survey respondents in this report. (continue reading…)

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Markit: Chinese Manufacturing Activity Declined Again

The HSBC Flash China Manufacturing PMI reflected reduced activity again, down from 50.7 in February to 49.2 in March. It has contracted in three of the past four months now, reflecting a decelerated rate of growth in China. China has reduced its target real GDP growth rate for 2015 to 7 percent. New orders (down from 50.4 to 49.3), exports (up from 47.1 to 49.0) and employment (down from 49.3 to 47.0) were all below 50 in March – the threshold signifying growth. It was the reduction in demand that pushed the headline index lower. On the positive side, output (unchanged at 50.8) continues to expand very modestly for the month, and the decrease in input prices (up from 42.2 to 44.7) have helped manufacturers in terms of costs, even as the rate of decline was less in March. (continue reading…)

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NFIB: Mixed News on Small Business Optimism in February

The National Federation of Independent Business (NFIB) said that optimism rose marginally in February. The Small Business Optimism Index increased from 97.9 in January to 98.0 in February, but remained below the peak observed in December (100.4). The December level was the highest since October 2006. The good news was that the headline index has trended higher, up from 91.4 in February 2014. With that said, there continue to be some lingering anxieties about the economic outlook, with some of the underlying data points easing a bit in February. (continue reading…)

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ISM: Manufacturing Activity Weakened in February on West Coast Ports, Reduced Energy Prices

The Institute for Supply Management (ISM) said that growth in manufacturing activity has continued to slow over the past few months, starting 2015 off on a weaker note. The headline purchasing managers’ index (PMI) has fallen from 57.9 in October to 52.9 in February, its slowest pace since January 2014, when severe winter storms dampened activity across-the-board. The sample comments suggest that the West Coast ports slowdown and falling energy prices were top-of-mind for many of the respondents, helping to explain much of this easing. At the same time, the stronger U.S. dollar and sluggish growth abroad were also likely factors, with export orders (down from 49.5 to 48.5) declining for the second straight month.  (continue reading…)

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Markit: Chinese Manufacturing Activity Contracted for the First Time Since May

The Chinese economy continues to slow, with the HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) contracting for the first time since May. The headline index declined from 50.0 in November to 49.5 in December. New orders (down from 51.3 to 49.6), output (up from 49.6 to 49.7) and employment (up from 48.7 to 48.9) were below 50 – the threshold signifying reduced activity – in December, with production declining for the second straight month. On the positive side, new export orders (up from 51.1 to 51.7) were still growing somewhat modestly. As such, this report suggests that the Chinese economy is ending 2014 much as it began it, with softness in the manufacturing sector. (continue reading…)

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ISM: Strong Gains in the Manufacturing Sector in October

The Institute for Supply Management’s (ISM) manufacturing purchasing managers’ index (PMI) grew strongly in October, rebounding after a disappointing headline figure in September. The main index rose from 56.6 in September to 59.0 in October, back to where it had been in August. As such, the August and October readings were both the highest levels since March 2011, suggesting healthy gains in the sector as we move into the fourth quarter. (continue reading…)

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Business Economists Anticipate “Steady” Growth in Second Half of 2014 and for 2015

Economists with the National Association for Business Economics (NABE) expect steady growth for the rest of this year and for next year. Respondents predict real GDP growth of 3.0 percent in the third quarter of 2014, 3.1 percent in the fourth quarter, and 3.0 percent for all of 2015. As such, it suggests that business economists feel that we have made significant progress in growth since weaknesses in the first quarter of this year.

You can see this rebound in the manufacturing figures, with panelists predicting 4.0 percent and 3.6 percent industrial production growth in 2014 and 2015, respectively. Each figure was marginally higher than in the June survey. These results are consistent with the mostly upbeat data seen in the latest NAM/IndustryWeek Survey of Manufacturers, which had sales, capital spending and hiring expectations at two-year highs. In terms of auto production, light vehicle sales should rise from an average of 15.5 million annualized units in 2013 to 16.3 million and 16.7 million in 2014 and 2015, respectively.

Meanwhile, housing starts should continue to move higher, up from an annualized 1.00 million in 2014 to 1.17 million in 2015, according to the panelists. Note that this reflects some easing in growth rates for the housing sector, as the June survey had predicted 1.27 million units by the end of 2015. The inability of business to obtain credit was the biggest factor for recent softness in the housing market, cited by 65 percent of those taking the survey. Yet, the longer-term trend remains positive.

The forecast was also encouraging in other areas. For instance, capital spending should continue to improve, with healthy gains for fixed investments in nonresidential structures, equipment and software, and intellectual property products. In terms of jobs, nonfarm payrolls should average 228,000 per month in 2014 and 211,000 in 2015. Business economists also expect the unemployment rate to drop to 5.7 percent by the end of 2015, down from 6.1 percent right now.

Regarding the Federal Reserve, nearly 70 percent of all respondents felt that the Fed would start raising short-term interest rates in either the second or third quarters of 2015.

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

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Monday Economic Report – September 29, 2014

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

The U.S. economy grew an annualized 4.6 percent in the second quarter of this year, its fastest pace since the fourth quarter of 2011. Consumer and business spending were the big bright spots in the real GDP report, with strong rebounds after softness in the first quarter. This latest revision reflected improved nonresidential fixed investment and goods exports data relative to prior estimates. At the same time, it is hard to forget that real GDP fell by 2.1 percent in the first quarter, with growth in the first half of 2014 expanding by a frustratingly slow 1.2 percent. Moving forward, manufacturers remain mostly upbeat. For instance, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) held firm at 57.9, its fastest pace since May 2010.

I estimate real GDP growth of 3.3 percent for the third quarter, which ends this week. Nonetheless, there are a number of downside risks, and business leaders and the public remain tentative in their optimism.

Along those lines, regional surveys from the Kansas City and Richmond Federal Reserve Banks continued to show expanding activity levels in their districts. The Richmond release found that activity has now grown for six straight months since winter-related contractions earlier in the year. It also reflected an uptick in production and demand, with the pace of hiring accelerating to its highest level since December 2010. All of this was encouraging. In the Kansas City district, manufacturers remained mostly positive, with more than half of respondents expecting increased production and shipments in the next six months. Among the issues cited in the Kansas City survey, manufacturers noted persistent challenges in attracting and retaining skilled workers. Other sample comments mentioned rising pricing pressures, both for wages and raw materials.

Turning to the global economy, the HSBC Flash China Manufacturing PMI edged slightly higher, up from 50.2 in August to 50.5 in September. This marked the fourth consecutive month with expanding manufacturing activity, improving from contractions in the first five months of the year. Yet, even with some signs of stabilization in China in recent data, the country is expected to continue to decelerate in its growth rates moving forward, something that it continues to grapple with. Similarly, the European Central Bank has struggled to cope with slow economic and income growth in the Eurozone, with persistent worries about deflation. Indeed, the Markit Flash Eurozone Manufacturing PMI eased yet again, down from 50.7 to 50.5. This was the lowest level of growth since July 2013, the first month that the Eurozone emerged from its deep two-year recession.

Meanwhile, housing data released last week were mixed. New home sales rose sharply, up from an annualized 427,000 in July to 504,000 in August. This was the highest level in more than six years, and the pace of sales in August starkly contrasts with what we have seen so far in 2014. This makes it likely that September figures will pull back a little, but the trend line remains promising. In contrast, existing home sales decreased 1.8 percent in August, which was disappointing given recent improvements. It is likely that August’s decline was the result of a strong July reading, with some easing probably inevitable. Moving forward, the expectation is that existing home sales should move higher, continuing a longer-run trend in the data since March.

This week, the focus will be on jobs. After a disappointing employment report in August, we anticipate better news in September. I would not be surprised if the zero jobs figure in August for manufacturing was revised higher, and I continue to expect manufacturing jobs gains to revert to an average of 12,500 to 15,000 per month for the rest of the year. Nonfarm payrolls should once again exceed 200,000 in September, an improvement from the 142,000 figure in August (which is also likely to get revised upward). Other highlights this week include the latest data on construction spending, factory orders, international trade, personal income and manufacturing activity in the Dallas Federal Reserve district.

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

real GDP forecast - sept2014

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ISM: Manufacturing Activity Expanded Very Strongly in August

The Institute for Supply Management’s (ISM) manufacturing purchasing managers’ index (PMI) rose very strongly, with the headline figure rising from 57.1 in July to 59.0 in August. This was the highest level since March 2011, and it reflected a robust recovery from weaknesses earlier in the year.  Indeed, new orders (up from 63.4 to 66.7) and production (up from 61.2 to 64.5) appear to be expanding at quite healthy paces, with indices for both exceeding 60 once again. The production measure has been over 60 for three straight months; whereas the new orders index was at its fastest pace since April 2004. Export sales (up from 53.0 to 55.0) were also improved.

The sample comments tend to echo these strong figures. As one electrical equipment manufacturer said, “Overall business is improving. Order backlog is increasing. Quotes are increasing. Much more positive outlook in our sector.” This pretty much summed up the increase in demand seen in many of the other comments, as well. Yet, those taking the ISM survey also noted some challenges, particularly the geopolitical risks and the ability to attract labor. The other concern noted in past surveys was pricing pressures, but they appear to have eased somewhat in August (down from 59.5 to 58.0).

On this latter point, the employment index was marginally lower (down from 58.2 to 58.1), but hiring growth has clearly picked up from recent months. The hiring index averaged 52.7, for instance, through the first six months of the year, further highlighting the July and August acceleration in the data. This should bode well for manufacturing jobs numbers out on Friday, which have averaged 22,000 between May and July and 15,000 each month over the past year.

Overall, this report shows that manufacturers are seeing strong growth more recently in demand and output, which is definitely positive given the disappointing start to the year. Manufacturing leaders are mostly positive about the second half of 2014, even as they are keenly aware of possible risks on the horizon. This includes geopolitical events, a cautious consumer and labor shortages, among other concerns. Still, it is nice to see the sector hitting on all cylinders, and the outlook for strong growth over the coming months remains positive.

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

ism

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Manufacturing Wages and Salaries Rose at Their Fastest Pace since 2001 in the Second Quarter

The Bureau of Labor Statistics released the latest employer costs data, showing wage pressures picking up in the second quarter. Manufacturing wages and salaries increased 3.4 percent at the annual rate in the second quarter, doubling the 1.7 percent pace observed in the first quarter. This was the fastest pace for manufacturing wage and salary growth since the fourth quarter of 2001, or 12½ years ago.

On a year-over-year basis, manufacturing wages and salaries have increased 2.2 percent, up from 2.0 percent in the prior quarter. As such, it suggests that overall wages in the sector have risen at a mostly modest pace over the past 12 months, but that pace has definitely accelerated of late. Given that inflationary pressures have also picked up, particularly for energy and food costs, the Federal Reserve will likely keep a close eye on what happens with wage growth moving forward.

Total compensation for manufacturers increased 2.0 percent at the annual rate, with 2.1 percent growth year-over-year. Compensation costs for manufacturers has also picked up so far in 2014, rising from a 1.8 percent year-over-year rate in the fourth quarter of 2013.

Still, the second quarter data benefited from a slower pace of growth for benefits, up just 0.3 percent at the annual rate. However, this followed a hefty 3.8 percent annualized jump in the first quarter, which was more than likely influenced by the implementation of the Affordable Care Act and higher health insurance costs. On a year-over-year basis, manufacturing benefit costs were up 1.9 percent, accelerating from 1.3 percent growth in the fourth quarter.

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

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