The Federal Reserve Bank of Philadelphia said that manufacturing activity contracted for the fifth straight month in January. The composite index of general business activity rose from -10.2 in December to -3.5 in January, and yet, the headline figure has now been in negative territory since September. (Note that prior data reflect an annual revision for seasonal adjustments.) The underlying data were mixed. The pace of decline for new orders (up from -11.1 to -1.4) slowed in this latest report. In contrast, labor market data worsened for the month, including hiring (down from 2.2 to -1.9) and the average workweek (down from 0.6 to -2.2). On the positive side, shipments (up from -2.1 to 9.6) picked up at a decent rate, expanding after three consecutive months of declines. Read More
The Bureau of Economic Analysis said that personal spending increased by 0.4 percent in August, mirroring the gain seen in July. It has not been positive for six consecutive months, after essentially stagnating in February. Durable and nondurable goods spending were both higher for the month, up 1.2 percent and 0.6 percent, respectively. Motor vehicles and parts helped to buoy the durable goods purchasing numbers in each of the past two months, up 1.6 percent and 2.1 percent in July and August, respectively, and rebounding from the 3.4 percent decline in June. On a year-over-year basis, personal spending has increased by 3.5 percent, down from 3.7 percent in the prior report. In general, this suggests that Americans are increasing their spending modestly, but it also indicates a slower rate of purchasing than the more-robust pace seen in late 2014. For instance, the year-over-year rate peaked at 5.0 percent in 2014 in August. Read More
The Bureau of Labor Statistics said that producer prices for final demand goods and services rose 0.4 percent in June, extending the 0.5 percent increase seen in May. The gains for the goods sector were even stronger. Indeed, producer prices for final demand goods jumped 1.3 percent and 0.7 percent, respectively, in May and June, with each month spurred higher by rising energy and food costs. On the energy front, energy goods were 5.9 percent and 2.4 percent more expensive in those two months, respectively. This was consistent with the rise in West Texas intermediate crude oil prices, up from an average of $54.45 per barrel in April to $59.82 a barrel in June. At the same time, final demand energy goods costs remain 17.9 percent lower today than 12 months ago. Read More
The Bureau of Labor Statistics said that consumer prices rose 0.1 percent in April, slightly lower than the 0.2 percent gains observed in both February and March. Lower energy prices helped to reduce the pace of the headline number, with energy costs down 1.3 percent for the month. Gasoline prices declined 1.9 percent in April, easing a bit after 2.4 percent and 3.9 percent increases observed in February and March, respectively. On a year-over-year basis, gasoline sells for 31.7 percent less today than in April 2014. Note that the average price of gasoline has risen a little since then, with the Energy Information Administration reporting that the average price of regular gasoline was $2.604 per gallon on May 18, up from $2.315 on April 6. This is still more than one dollar lower than seen 12 months ago. Read More
Here is the summary for this week’s Monday Economic Report:
The U.S. economy grew 2.4 percent in 2014, just barely edging out the 2.2 percent gain in 2013. Yet, that somewhat understates the strength of the economy since the winter-related weaknesses seen at this point last year. Indeed, real GDP increased by an annualized 4.1 percent during the last three quarters of 2014, and in the fourth quarter, Americans spent at a healthy 4.3 percent annual pace, the fastest rate since the first quarter of 2006. Still, the 2.6 percent growth rate in real GDP in the fourth quarter also had some red flags. Weaker growth abroad, a strengthening U.S. dollar and worries about dramatically lower energy prices have impacted capital spending and international demand negatively. Therefore, while manufacturers remain mostly upbeat about orders and production in 2015, these developments serve as a reminder of the challenges in the global marketplace right now. Read More
The Bureau of Labor Statistics said that producer prices for final demand goods and services decreased 0.3 percent in December. Looking just at goods, producer prices for final demand items have now fallen for six consecutive months, down 3.0 percent over that time frame. A large part of that decline, of course, stemmed from sharply lower petroleum prices. Producer prices for energy goods were off 6.6 percent in December, with a 14.8 percent decline since June. This has generally helped to push inflationary pressures lower. Read More
The Bureau of Labor Statistics reported that producer prices for finished goods dropped 0.2 percent in October, falling for the second straight month. Declining energy prices helped to push costs lower once more. The price of finished energy goods declined 1.5 percent for the month, with gasoline prices off 3.8 percent. Indeed, the price of West Texas intermediate crude fell from $102.36 per barrel on September 30 to $96.29 a barrel on October 31. The producer price index data reflect this decline with energy costs declining at the intermediate and crude levels, as well.
After falling by 1.0 percent in September, the cost of food increased by 0.8 percent in October. The previous month’s decline had been largely driven by reduced prices for fresh and dry vegetables, and the cost of vegetables rebounded somewhat this time. Yet, the bulk of the increase in October stemmed from higher costs for beef and veal, with turkey prices also up significantly. (Happy Thanksgiving!)
For manufacturers, raw material costs were down 0.7 percent in October, with input prices down 0.4 percent year-over-year. As such, the sector has benefited from the recent deceleration of producer costs, easing pricing pressures.
With that said, there were pockets in the manufacturing industry that did experience some sizable monthly gains in their costs. This included the transportation equipment (up 1.6 percent), wood products manufacturing (up 0.8 percent), beverage and tobacco (up 0.7 percent), and textile mills (up 0.5 percent) sectors. The petroleum and coal products sector had a 3.2 percent decline in costs, as discussed above.
On a year-over-year basis, the following sectors have experienced raw material cost increases of two percent or more over the past 12 months: wood products (up 6.7 percent), leather and allied products (up 3.5 percent), paper (up 3.5 percent), nonmetallic mineral products (up 3.0 percent), apparel (up 2.4 percent), and plastics and rubber products (up 2.2 percent) manufacturing.
Overall inflation continues to be extremely modest, with producer prices up just 0.3 percent on a year-over-year basis. This is down from the 2.5 percent annual pace observed in June. When you exclude food and energy costs, the annual rate of core inflation was just 1.4 percent, unchanged for the past two months. Such news should serve as further comfort for the Federal Reserve, which continues to debate when to taper its asset purchases but plans to stay with its highly accommodative policies for the foreseeable future.
Chad Moutray is the chief economist, National Association of Manufacturers.
The Bureau of Labor Statistics said that consumer prices rose 0.2 percent in July, moderating slightly from June’s 0.5 percent rise. Both food and energy costs were higher, but the growth in energy prices slowed from the previous month. In June, the cost of energy products increased 3.4 percent, with gasoline alone up 6.3 percent. In July, those growth rates eased to 0.2 percent for energy goods and 1.0 percent for gasoline. This is consistent with the recent rise in West Texas intermediate crude oil costs, which have risen from an average of $93.80 a barrel in June to $104.61 in July.
Food prices rose 0.2 percent and 0.1 percent in June and July, respectively. The cost of fruits and vegetables were up sharply for the month, with pork prices also higher. These gains were counteracted by reductions in the price of cereal products, dairy products, and nonalcoholic beverages, among others. On a year-over-year basis, food prices have risen 1.4 percent, with the largest gains occurring in food consumption away from home (up 2.1 percent).
Outside of food and energy, the largest year-over-year increases in prices were for transportation services (up 3.0 percent), medical care services (up 2.6 percent), shelter (up 2.3 percent), tobacco and smoking products (up 1.7 percent), apparel (up 1.6 percent), and new motor vehicles (up 1.2 percent).
Overall, consumer prices have risen 2.0 percent over the course of the past 12 months. This suggests a pickup in inflationary pressures, with the annual pace up from 1.1 percent in April and 1.8 percent in June. Excluding food and energy, core inflation is currently 1.7 percent, edging slightly higher from the 1.6 percent rate observed in June.
These data suggest that inflation remains modest, with core inflation below the Federal Reserve’s stated target of 2 percent. The producer price index report released yesterday said mostly the same thing. This allows the Federal Reserve to pursue “highly accommodative” policies, even as it seeks to “taper” (or slow) its asset purchases later this year.
Chad Moutray is the chief economist, National Association of Manufacturers.
Today President Obama spoke about energy policy at Prince George’s Community College in Largo, Maryland. The President said we need an energy strategy for the future and an “all of the above” strategy for the 21st century that develops every source of American-made energy.
The Administration seems to have missed the mark again. Clearly every source is not in the Administration’s plan as the EPA’s Utility MACT regulation is forcing the closure of clean coal power plants throughout the country, resulting in lost jobs.
The President also stated that his Administration has approved dozens of new pipelines to transport oil:
We’ve quadrupled the number of operating oil rigs to a record high. I want everybody to listen to that — we have more oil rigs operating now than ever. That’s a fact. We’ve approved dozens of new pipelines to move oil across the country. We announced our support for a new one in Oklahoma that will help get more oil down to refineries on the Gulf Coast.
The pipeline in Oklahoma the President is referencing is what will be a section of the Keystone XL pipeline which TransCanada announced they will begin construction on soon in Oklahoma and Texas. The President decided that it wasn’t in the nation’s best interest back in January to approve the entire stretch of the pipeline from Canada down to Texas. Keystone XL would bolster our supply and provide manufacturers with an affordable source of energy.
Manufacturers can’t afford more of the same policies from Washington which are driving up energy prices and stifling growth. It’s time for a real “all of the above” approach which includes developing all domestic sources of energy to drive down energy prices.
It’s extremely disappointing the Senate failed today to take a stand for jobs and manufacturers by voting down important amendments to the transportation bill that would delay the harmful Boiler MACT regulations, expand exploration of the Outer Continental Shelf and approve the Keystone XL pipeline project. Senators failed to pass these amendments which would have saved jobs, created jobs and injected the economy with new life.
There were 52 votes in support of the Collins amendment. Lisa Jackson, the Administrator of the Environmental Protection Agency (EPA), has spent much of the past eight days up in the Senate meeting with Democratic Senators trying to convince them that there was really no need for the Senate to pass legislation. The standards the EPA has put forward are not achievable with our current technology, and the EPA knows this.
Manufacturers want reasonable and achievable regulations. They want some degree of certainty. They want government to quit trying to pick winners or favorites.
The Vitter amendment to expand drilling in the Outer Continental Shelf (OCS) was rejected on a 46-52 vote. Senators need to realize that every barrel of oil produced in North America is another barrel that we don’t have to pull from somewhere else in the world. The more sources of oil and the more supply of oil means energy will be more affordable for manufacturers and that means more jobs. The Vitter amendment would open up vast tracks of the OCS to oil exploration and make the country more self-reliant. Read More