Tag: Factory orders

Monday Economic Report – June 8, 2015

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

The Federal Reserve’s Beige Book reported that the economy expanded modestly in its recent assessment. More importantly, it said that activity for manufacturers “held steady or increased over the reporting period” in all of its regions except for the Dallas and Kansas City districts. Those two regions have been rocked by lower crude oil prices and sluggish export growth in particular. Yet, beyond those challenges, the Federal Reserve noted some improvements in retail spending (especially for motor vehicles), housing and employment. Despite this mostly upbeat economic analysis, the Federal Reserve is keenly aware of the challenges that exist in the marketplace, as noted in the minutes of the most recent Federal Open Market Committee meeting. Indeed, data released last week continue to reflect a softer-than-desired level of activity in many areas, even as manufacturers might remain cautiously optimistic about the future and some of the measures rebounded somewhat. (continue reading…)

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Monday Economic Report – May 11, 2015

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

Once again, there was evidence last week that significant headwinds have dampened activity in the manufacturing sector. The sector added just 1,000 net new workers in April, marking the third consecutive month with soft hiring. The data suggest that challenges from a strong dollar, slowing growth abroad, lower crude oil prices, residual effects from the West Coast ports slowdown, a cautious consumer and weather have combined to take their toll on the economy, at least for the time being. (continue reading…)

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Monday Economic Report – March 9, 2015

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

According to the latest NAM/IndustryWeek Survey of Manufacturers, which will be released this morning, business leaders remain mostly confident about activity over the coming months. In fact, 88.5 percent of respondents said they were either somewhat or very positive about the own company’s outlook, and the data are consistent with 3 percent growth in manufacturing production over the next two quarters. Yet, manufacturers who replied to this survey were slightly less upbeat than they were three months ago, when 91.2 percent of respondents were positive in their outlook. Sales, exports and hiring expectations over the next 12 months also decelerated slightly, even as they remain improved from the paces seen a year ago. (continue reading…)

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Monday Economic Report – February 9, 2015

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

Manufacturers in the United States have added roughly 18,800 workers per month on average over the past 13 months, with an average of 29,000 from October through January. This suggests that the momentum in demand and production in the second half of 2014 has led to an uptick in hiring, which is encouraging. Income growth was also higher, with average weekly earnings up 2.0 percent year-over-year in January. At the same time, the larger economy has also seen strong growth, with nonfarm payrolls increasing by nearly 260,000 per month since the end of 2013. The unemployment rate edged up to 5.7 percent, however, as more Americans re-entered the labor force looking for work. The participation rate rose from 62.7 percent to 62.9 percent. (continue reading…)

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Monday Economic Report – January 12, 2015

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

The U.S. economy generated 2.95 million net new nonfarm payroll workers in 2014, the fastest annual pace since 1999. In addition, the unemployment rate fell to 5.6 percent, its lowest level since June 2008. One might quibble that these figures overstate the overall health of the labor market, with part-time employment and unemployment still being a challenge. Indeed, the participation rate remains near 30-year lows. Still, the data suggest movement in the right direction. Manufacturers, for instance, hired an additional 15,500 workers on average each month in 2014, with 762,000 more employees since the end of 2009. The sector currently employs just more than 12.2 million workers. Therefore, manufacturing employment has increased at a decent pace of late, consistent with a mostly upbeat outlook. (continue reading…)

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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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