Tag: Factory orders

Monday Economic Report – December 8, 2014

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

This morning, we will release the results from the latest NAM/IndustryWeek Survey of Manufacturers. Business leaders continue to reflect optimism about the coming months, with 91.2 percent of survey respondents saying they are either somewhat or very positive about their own company’s outlook. Moreover, manufacturers predict growth of 4.5 percent in sales and 2.1 percent in employment  over the next 12 months, with both experiencing the strongest pace in at least two years. (continue reading…)

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Monday Economic Report – November 10, 2014

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

yoy manufacturing sector employment - nov2014Last week, we received a number of encouraging reports on the state of the manufacturing sector and the U.S. economy. The Institute for Supply Management reported that its manufacturing Purchasing Managers’ Index (PMI) rebounded, up from 56.6 in September to 59.0 in October. This brought the index back up to where it was in August, with both readings at their highest levels since March 2011. This suggests that the manufacturing sector was making healthy gains as we began the fourth quarter, and as further evidence, demand and production were both higher in October. In fact, the new orders and output indices have now been 60 or greater for six straight months. Hiring also picked up. (continue reading…)

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Monday Economic Report – September 8, 2014

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

The U.S. economy added 142,000 nonfarm payroll workers in August, a disappointing figure given signs of a rebound in many other indicators lately. The consensus expectation had been for nonfarm payroll growth to exceed 200,000 jobs for the seventh consecutive month, as was observed in the estimates provided by ADP the day before. Manufacturing employment was flat for the month, which was also a disappointment. It ended a 12-month streak of job gains for the sector, a period in which manufacturers added 168,000 net new workers. Hopefully, the August jobs report was just a brief pause in what otherwise had been positive news on the labor front.

The Institute for Supply Management’s (ISM) purchasing managers’ index (PMI) data provides much encouragement that manufacturing activity is moving in the right direction heading into the autumn months. The headline PMI figure rose from 57.1 in July to 59.0 in August, its highest level since March 2011, and it reflected a robust recovery from weaknesses earlier in the year. Indeed, new orders and production expanded at healthy paces. These findings mirror the latest NAM/IndustryWeek Survey of Manufacturers, which is being released this morning, showing respondents mostly upbeat about their own company’s outlook, with sales, capital spending and hiring expectations at two-year highs. Indeed, 87.3 percent of those taking the survey were either somewhat or very positive in their outlook, up from 85.9 percent three months ago. The data are largely consistent with 3.1 percent growth in manufacturing production over the next two quarters.

Manufacturers spent 4.4 percent more on construction projects in July, also providing some reassuring news. The sector has devoted 23.9 percent more to construction projects over the past 12 months, an indication that the increase in demand and output observed over that time frame has resulted in a jump in new investments. Meanwhile, new factory orders data provided mixed news. While orders increased by a whopping 10.5 percent in July, much of that stemmed from highly volatile nondefense aircraft sales. Excluding transportation orders, new factory orders declined 0.8 percent for the month, a finding that we had noted in the earlier release of preliminary durable goods data. Still, factory orders excluding transportation have risen 2.7 percent over the past six months (since weather-related declines in January), which mostly mirrors the more positive data in other releases.

Looking at exports, the U.S. trade deficit narrowed ever-so-slightly in July, with an increase in goods exports marginally offsetting an increase in goods imports. Yet, manufactured goods exports have risen only slightly year-to-date, up just 0.8 percent so far in 2014 using non-seasonally adjusted data. On the other hand, these same figures show that exports to our top five exports markets were higher through the first seven months of this year relative to last year. Regardless, manufacturers hope that the pace of export growth accelerates, with sluggish sales frustrating business leaders and net export growth providing a drag on real GDP over the past two quarters.

This week, we will get new data on consumer confidence, job openings, retail sales and small business optimism. Markets will also continue to digest Friday’s employment numbers, trying to decipher if they were an aberration or a sign of larger weaknesses. In particular, this discussion centers on how the Federal Reserve will interpret such things, with a debate already ongoing as to when the Federal Open Market Committee will begin to increase short-term interest rates. Conventional wisdom holds that short-term interest rates will rise sometime in 2015, but whether that occurs earlier or later in the year is up for debate between those who are more hawkish or dovish on inflation. In the Beige Book, which was released last Wednesday, the Fed mostly observed progress in the economy in recent months, including in manufacturing. Yet, as long as the Fed continues to see “slack” in the labor market, it might be less willing to normalize rates.

Chad Moutray is the chief economist, National Association of Manufacturers. 
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New Factory Orders Jumped Strongly in July on Aircraft Sales, but Declined Otherwise

The Census Bureau said that new factory orders jumped 10.5 percent in July. With that said, much of that increase stemmed from nondefense aircraft orders (up from $16.8 billion in June to $70.3 billion in July), as noted in the previous release of preliminary durable goods sales figures. Commercial airplane orders are choppy, with sales usually announced in batches. Motor vehicle sales were also stronger in July, up 7.3 percent.

Excluding transportation, new factory orders declined 0.8 percent, suggesting softness in the broader market. Durable goods orders excluding transportation fell 0.7 percent, with nondurable goods sales off 0.9 percent. Despite the decline in July, demand has largely been higher since January’s winter-related decreases, and new manufacturing orders excluding transportation have risen 2.7 percent over the past six months. As such, hopefully, the July numbers are just a pause in an otherwise positive trend year-to-date.

Looking specifically at new durable goods orders in July, the data were mostly lower. This included electrical equipment and appliances (down 4.8 percent), computers and electronic products (down 1.7 percent), furniture and related products (down 1.2 percent), machinery (down 1.2 percent) and primary metals (down 0.3 percent). Outside of transportation, the only other major sector with higher sales in July was fabricated metal products, up 0.1 percent.

Meanwhile, shipments of manufactured goods increased 1.2 percent, rising for the second straight month. Since January, shipments have increased 3.7 percent, illustrating the rebound seen over the past six months after weaknesses earlier in the year. Durable goods shipments rose 3.5 percent (or 1.5 percent excluding transportation); whereas, nondurable goods shipments fell 0.9 percent.

The largest increases were in transportation equipment (up 8.1 percent), machinery (up 3.0 percent), computers and electronic products (up 2.4 percent), nonmetallic mineral products (up 1.6 percent), textile mills (up 1.6 percent) and primary metals (up 1.4 percent). In contrast, shipments of petroleum and coal products (down 3.2 percent), textile products (down 2.1 percent) and chemical products (down 1.0 percent) declined in July.

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

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Monday Economic Report – August 11, 2014

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

In a light week for economic indicator releases, geopolitical events dominated the headlines and moved equity markets. With U.S. airstrikes in Iraq, battles between Israel and Hamas in the Gaza Strip, and mounting tensions with Russia, financial markets have a lot to absorb, with uncertainty sending stock values lower. Even with a triple-digit gain on Friday, the Dow Jones Industrial Average has fallen 3.5 percent since hitting an all-time high of 17,138.20 on July 16. From an economic perspective, geopolitical challenges could put downward pressure on forecasts for the second half of 2014 depending on how they evolve in the coming days and months. Absent these global anxieties, manufacturers have tended to be mostly upbeat about the next six months, and several recent data points have suggested rebounding demand and output as we began the third quarter.

New factory orders have risen in four of the past five months, increasing 1.1 percent in June and 4.6 percent since January. With that said, year-over-year growth has been less robust, up just 1.5 percent. This shows the extent to which winter weather weakened sales earlier this year. Still, June’s new factory orders figure of $503.2 billion reached an all-time high, which was encouraging. This data is largely consistent with positive news of late on real GDP, manufacturing sentiment surveys, and hiring. Indeed, manufacturing labor productivity increased by a relatively healthy 3.6 percent in the second quarter, lifted by robust gains in output. Unit labor costs declined 1.3 percent, with durable goods industries accounting for much of that decrease. Productivity gains since 2009 have helped to keep the sector more competitive globally, particularly for durable goods firms.

In June, the U.S. trade deficit fell to its smallest level since January, as goods imports declined at a faster pace than goods exports increased. Nonetheless, we continue to see relatively slow growth for U.S.-manufactured goods exports, which have increased 1.7 percent year-to-date. Ideally, we will see improvements moving into the second half of the year, as the current pace represents a deceleration from last year’s 2.6 percent rate of growth. Of course, challenges abound on this front, with news of weak growth in Europe, flat export sales growth to our largest trading partner Canada, and decelerating growth rates in China.

This week, we will get new industrial production figures for July. We anticipate manufacturing output growing for the sixth straight month, modestly extending upon the 3.1 percent growth observed since January. The New York Federal Reserve Bank’s Empire State Manufacturing Survey is also expected to show continued expansion for the sector in its district. Other highlights this week include the latest data on consumer sentiment, job openings, producer prices, retail sales, and small business optimism.

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

labor productivity - aug2014

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Monday Report – May 5, 2014

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

With the U.S. economy growing just 0.1 percent in the first quarter of 2014, analysts need to ask themselves whether this was just an aberration—a function largely of winter-related slowness—or a sign of larger weaknesses. The preliminary real GDP data showed drags from business investment, net exports and the government. Consumer spending on services was the biggest positive, and durable and nondurable goods purchases were up marginally for the quarter. My view is that real GDP probably will be revised higher in future updates, particularly with other data showing rebounding activity in March.

Fortunately, other recent economic reports show the economy recovering from difficulties earlier in the year. Consumer spending picked up strongly in March, with pent-up demand for durable goods, such as automobiles, pushing up overall purchases. Along those lines, manufacturing construction spending and new factory orders were also higher in March, with the Dallas Federal Reserve Bank’s monthly survey mirroring other regional reports showing an increase in respondents’ outlook.

Nationally, manufacturing confidence appears to be rising, with the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) rising from 53.7 in March to 54.9 in April, its highest point so far in 2014. Still, activity remains below the torrid pace at the end of last year. The ISM’s PMI values averaged 56.3 in the second half of 2013, with new orders and output averaging 61.8 and 62.6, respectively. As such, there is still room for improvement. One of the brighter spots in the ISM release was the increased pace of hiring, with the employment index jumping from 51.1 to 54.7. This suggested that more manufacturers were adding workers, which was progress from the slower rate the month before.

In fact, the sector has hired more than 13,000 additional employees on average each month since August, when manufacturing demand and output began gaining momentum last year. Since the end of 2009, manufacturers have created 623,000 new jobs, with 12.1 million workers total in April. In the larger economy, nonfarm payrolls increased by 288,000 for the month—well above the consensus estimate of around 220,000—and the unemployment rate fell sharply from 6.7 percent in March to 6.3 percent in April. Despite this progress, the unemployment rate’s decline was largely due to a significant drop in the labor force size. The participation rate returned to where it was in December, matching its lowest point since February 1978.

From its perspective, the Federal Reserve felt that the economy was getting better; yet, it continues to worry about elevated unemployment rates, reduced business investment and fiscal restraints. For that reason, the Federal Open Market Committee (FOMC) reported that it would keep its highly accommodative stance for the foreseeable future, with short-term rates effectively zero until likely sometime in 2015. Meanwhile, the Federal Reserve continued to taper its long-term and mortgage-backed securities purchases from $55 billion per month to $45 billion, as expected. On the positive side, inflationary pressures remain minimal, with the personal consumption expenditure deflator up just 1.1 percent year-over-year and below the FOMC’s stated target of 2 percent.

This week, the highlight will come tomorrow with the release of new international trade numbers. In the first two months of 2014, manufactured goods exports were below their pace of 2013. It will be important to see if the picture improves in the March data. Beyond trade, other highlights to watch include the latest reports on consumer credit, job openings, productivity and wholesale trade.

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

monthly employment changes - may2014

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Monday Economic Report – April 7, 2014

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

Manufacturers appear to be recovering from softness in the first two months of the year, mainly due to the number of severe winter storms. The Institute for Supply Management (ISM) reported that its Purchasing Managers’ Index (PMI) edged higher, up from 53.2 in February to 53.7 in March. Production began expanding again, with the pace of new orders and exports picking up slightly. Despite some degree of progress in March, sentiment remains lower than just a few months ago. PMI values averaged 56.3 in the second half of last year, with sales and output measures exceeding 60—indicating strong growth—each month from August to December.

Likewise, new factory orders increased 1.6 percent in February, partially offsetting the sharp declines in December and January. Beyond autos and aircraft, however, durable goods sales were just barely higher, suggesting more needs to be done for broader growth in the sector. Meanwhile, the Dallas Federal Reserve Bank’s manufacturing survey reflected a rebound in activity consistent with other Federal Reserve districts. Texas manufacturers remain positive about sales, output, hiring and capital spending moving forward. For example, more than half of respondents anticipate increased demand over the next six months. Still, some cited regulatory, pricing pressure, workforce and foreign competition concerns.

On the hiring front, Friday’s jobs numbers provided mixed news for manufacturers. The sector lost 1,000 workers in March, mainly due to declines in nondurable goods industries. This was particularly disappointing given consensus expectations that were closer to the ADP’s estimates, which had a gain of 5,000 workers for the month. Yet, revisions to January and February data provided some comfort, adding 15,000 more employees than original estimates. As a result, the longer-term trend for manufacturing did not change much despite March’s lower figure. Manufacturers have added more than 600,000 workers since the end of the recession, and since August, the sector has generated an average of 12,125 net new jobs per month. Another positive in this report was that the average number of hours worked and average compensation both rose, findings that mirror the rebound in overall activity.

Meanwhile, the latest international trade figures were also disappointing. The U.S. trade deficit widened from $39.28 billion in January to $42.30 billion in February. This was the highest deficit since September and the result of a decrease in goods exports and an increase in service-sector imports. Petroleum exports were also marginally lower. The numbers were particularly discouraging given that manufactured goods exports in January and February of this year were 0.6 percent lower than the first two months of last year. Still, outside of softness in our goods exports to Canada, the other top-five export markets for U.S.-manufactured goods registered increases year-to-date in 2014 relative to 2013. In addition, there remains cautious optimism that export sales will improve in the coming months.

This week, the focus will be on the release of the minutes from the March Federal Open Market Committee (FOMC) meeting. The minutes will provide additional insights on the internal debates that led the Federal Reserve Board to continue tapering but to also change its forward guidance for short-term interest rates. On Friday, the release of producer price data should continue to show that overall inflation remains minimal. Other highlights include the latest data on consumer confidence, job openings, small business optimism and wholesale trade.

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

ism pmi - apr2014

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New Factory Orders Rebounded in February from Softness in December and January

The Census Bureau said that new factory orders increased 1.6 percent in February, recovering somewhat from the sharp declines in both December and January. This was consistent with the advance data provided on durable goods the week before, with the sector rebounding from winter weather slowness. New manufactured goods orders have risen from $482.7 billion in August to $488.8 billion in February, an increase of 1.3 percent.

New durable goods orders rose 2.2 percent for the month, lifted by strong sales growth for motor vehicles and aircraft. Excluding transportation, manufacturing orders were up 0.7 percent, with durable goods edging only marginally higher in February, up just 0.1 percent. At the same time, new nondurable manufactured goods increased by 1.0 percent.

Looking specifically at new durable goods orders in February, the data were largely mixed. Areas of strength included transportation equipment (up 7.0 percent), primary metals (up 1.7 percent), fabricated metal products (up 0.4 percent), computers and electronic products (up 0.2 percent), and furniture and related products (up 0.2 percent). But, these were offset by reduced new orders for electrical equipment and appliances (down 1.3 percent) and machinery (down 1.2 percent).

Meanwhile, manufactured goods shipments were up 0.9 percent, also rebounding after lower data in both December and January. Durable and nondurable goods shipments rose 0.8 percent and 1.0 percent, respectively. On a year-over-year basis, shipments have grown from $489.5 billion in February 2013 to $493.5 billion, up 0.8 percent.

Sectors with the largest increases in monthly shipments included textile products (up 4.9 percent), petroleum and coal products (up 2.0 percent), machinery (up 1.7 percent), nonmetallic mineral products (up 1.7 percent), transportation equipment (up 1.5 percent), apparel (up 1.4 percent), and plastics and rubber products (up 1.0 percent). In contrast, there were declining shipments in the following areas: leather and allied products (down 1.6 percent), computers and electronic products (down 1.4 percent), beverage and tobacco products (down 0.7 percent), electrical equipment and appliances (down 0.5 percent), printing (down 0.3 percent), and wood products (down 0.3 percent).

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

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New Factory Orders Were Down for the Second Straight Month in January

The Census Bureau said that new factory orders declined for the second straight month, down 2.0 percent and 0.7 percent in December and January, respectively. This was not a surprise, particularly given the already-released estimates for durable goods orders and the recent challenges with weather. Much of the decline in January stemmed from reduced auto and defense aircraft sales. As such, new factory orders excluding transportation increased 0.2 percent, indicating a very modest rebound from the 0.1 percent decline the month before.

New durable and nondurable manufactured goods orders were both lower in January, down 1.0 percent and 0.4 percent, respectively. With that said, as noted above, durable goods excluding transportation rose 0.1 percent, indicating broader strength than the headline figure might suggest. Areas of strength in the durable goods sector included fabricated metal products (up 7.4 percent) and computers and electronics (up 3.7 percent). But, these were somewhat offset by reduced new orders for furniture and related products (down 3.6 percent), electrical equipment and appliances (down 2.2 percent), primary metals (down 1.2 percent), and machinery (down 0.7 percent).

Meanwhile, manufactured goods shipments were also lower for the second consecutive month, with declines of 0.3 percent in both December and January. Durable goods shipments were off by 0.3 percent, with nondurable goods down 0.4 percent. Negative weather influences can be seen in this data, particularly to the extent that consumers were not able to get the stores to make purchases.

Sectors with the largest declines in monthly shipments included textile products (down 11.4 percent), textile mills (down 3.8 percent), machinery (down 2.9 percent), automobiles (down 1.8 percent), apparel (down 1.0 percent), and chemical products (down 1.0 percent). In contrast, there were increased shipments observed in the following areas: electrical equipment and appliances (up 1.5 percent), nonmetallic mineral products (up 1.3 percent), food products (up 1.2 percent), computers and electronics (up 0.7 percent), and wood products (up 0.7 percent).

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

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Monday Economic Report – February 10, 2014

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

Hiring in the manufacturing sector continued to expand in January, averaging 15,500 per month since August. This uptick in employment for manufacturers has corresponded to the acceleration in product demand and production in the second half of 2013, with cautious optimism for 2014. However, the overall jobs numbers were disappointing for the second straight month. Nonfarm payrolls grew by just 75,000 and 113,000 in December and January, respectively, which was well below the consensus expectation of 175,000 and the 2013 average monthly gain of 193,500.

Some of the releases out last week show the negative impact that weather has had on activity. For instance, new factory orders declined 1.5 percent in December, with broad-based weaknesses in the durable goods sector pulling the data lower. Shipments were also down. Likewise, manufacturing construction spending fell 5.1 percent in December, which was notable because of a mostly upward trend from June to November. Overall construction activity edged marginally higher in December, boosted by strong residential construction activity, but nonresidential and public spending was down.

The Institute for Supply Management’s Purchasing Managers’ Index (PMI) report showed a considerable decline in manufacturing sentiment, down from 56.5 in December to 51.3 in January. The biggest declines were in new orders, output and employment, but the pace of export orders was off only slightly. The pace of export orders was off only slightly. This indicates that domestic factors were the main contributors of the decline.

Meanwhile, the U.S. trade deficit rose from $34.56 billion in November to $38.70 billion in December, but the deficit narrowed for 2013 as a whole. Petroleum was a major factor in the smaller trade deficit last year, with increased petroleum exports and fewer imports. Unfortunately, manufactured goods exports did not increase as much last year as we would have preferred, up just 2.4 percent in 2013 versus 5.7 percent in 2012. We hope stronger global economic growth will produce improved manufactured goods exports in 2014.

In other news, the Congressional Budget Office released its 10-year budget and economic outlook. The deficit will be $514 billion in fiscal year 2014, an improvement from the more than $1 trillion deficits in fiscal years 2009–2012 and the $680 billion deficit in fiscal year 2013. The report shows the growth of mandatory spending rising from $2.03 trillion in fiscal year 2013 to $3.74 trillion in fiscal year 2024. Because of this, federal deficits will start to rise again beginning in fiscal year 2017, with deficits exceeding $1 trillion in fiscal year 2022. With such facts, it should not be a surprise that 86.3 percent of manufacturers want policymakers to find a long-term federal budget deal that tackles the debt and deficit, including reining in entitlements.

This week, we will get new industrial production data on Friday. The last report showed manufacturing output rising at an annualized 4.2 percent rate in the second half of 2013, but we will see if the data show production easing somewhat in January due to weather or other factors. The consensus expectation is for modest output gains of roughly 0.3 percent. Other highlights will be the latest figures on consumer confidence, job openings, retail sales and small business optimism.

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

cbo entitlement spending - feb2014

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