Tag: federal reserve

Higher Gasoline Costs Push Consumer Prices Up 0.3 Percent in December

The Bureau of Labor Statistics reported that consumer prices rose 0.3 percent in December, its fastest pace since June. The consumer price index had declined 0.1 percent in October and was unchanged in November. On a year-over-year basis, we have seen a pickup in consumer price inflation over the past couple months, up from 0.9 percent in October to 1.2 percent in November to 1.5 percent in December. Core inflation, which excludes food and energy costs, was 1.7 percent in December for the fourth consecutive month.

In essence, price increases continue to be in the acceptable range, with the annual pace of inflation remaining below the Federal Reserve’s stated goal of 2 percent. Year-over-year consumer prices have remained below 2 percent each month since February 2013. A similar finding was noted in yesterday’s producer price index release.

Nonetheless, December’s data did reflect a modest increase, with a 3.1 percent increase in gasoline prices pushing the consumer price index higher. Indeed, the monthly average for West Texas intermediate crude jumped from $93.86 per barrel in November to $97.63 a barrel in December.

Food prices increased 0.1 percent for the third straight month. In December, this higher figure stemmed largely from a rise in restaurant prices. Prices for food purchased at home were unchanged. Increased prices for meats, fish, and eggs were offset by declining costs for cereals and bakery products.

Outside of food and energy, core inflation was also up 0.1 percent for the month. There were increases in the price of apparel, medical care services, and shelter in December. In contrast, the cost of medical care commodities, transportation services, and used cars are trucks were lower.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)


After Two Months of Declines, Producer Prices Rose in December

The Bureau of Labor Statistics reported that producer prices for finished goods rose 0.4 percent in December. This follows declines of 0.2 percent and 0.1 percent in October and November, respectively. On a year-over-year basis, producer prices have risen 1.2 percent since December 2012. This suggests a bit of pickup in the annual rate, up from 0.3 percent in October and 0.7 percent in November.

Nonetheless, pricing pressures remain quite minimal for the most part. Year-over-year core inflation, which excludes energy and food costs, was 1.4 percent in December, up from 1.3 percent in November. Note that the annual pace of price increases has been below 2 percent – the stated goal of the Federal Reserve – for all of 2013. This frees the Fed to pursue highly accommodative monetary policies to stimulate growth, with worries about inflation reduced (at least for now).

The increase in producer prices in December was due to higher energy costs. The price of finished energy goods increased 1.6 percent in December, up primarily from diesel fuel and home heating oil. Crude energy costs were also higher, up 6.2 percent, on increased petroleum costs. Indeed, the cost of West Texas intermediate crude oil rose from $92.55 per barrel at the end of November to $98.17 at the end of December. In contrast to energy, food costs were off 0.6 percent in December, with vegetable prices leading the data lower.

For manufacturers, there were modest gains in raw material costs, up 0.3 percent in December. Yet, overall pricing pressures have been minimal over the course of the past year, with producer prices in the manufacturing sector rising just 0.6 percent over the past 12 months.

Nonetheless, there were some sector that experienced more rapid changes in input cost in December than the overall  average suggests. The largest increases in monthly raw material costs were seen in the following sectors: wood products (up 4.5 percent), leather and allied products (up 3.9 percent), paper products (up 3.1 percent), nonmetallic mineral products (up 2.9 percent), plastics and rubber products (up 2.4 percent), beverages and tobacco (up 2.0 percent), apparel (up 1.7 percent), textile products (up 1.6 percent), chemicals (up 1.3 percent), and machinery (up 1.2 percent). Still, these shifts mostly reflect some recent volatility in the data, with annual rates of change that were more consistent with the overall year-over-year average.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)


November Personal Spending Increased Modestly Led by Strong Growth in Durable Goods

The Bureau of Economic Analysis said that personal spending growth grew 0.5 percent in November, extending the 0.4 percent gain seen in October. Consumer spending has increased 3.5 percent over the past 12 months, its fastest pace so far in 2013 and an improvement from the 2.9 percent year-over-year rate in September. Nonetheless, it is clear that personal spending growth has decelerated from the 4.1 percent pace average of 2012 to the 3.1 percent average year-to-date in 2013.

Looking specifically at the November data, the growth in personal goods spending stemmed from an increase in durable goods expenditures. Spending on durable goods increased from an annualized $1.282 trillion in October to $1.307 trillion in November. Meanwhile, purchases of nondurable goods declined in the month from $2.667 trillion to $2.657 trillion.

Both durable and nondurable goods spending continue to increase over a longer term. Six months ago (May), for instance, durable and nondurable goods purchases were $1.255 trillion and $2.585 trillion, respectively.

Meanwhile, personal income rebounded in November, rising by 0.2 percent after falling 0.1 percent in November. Much of October’s decrease had been attributable to a sharp falloff in farm proprietors’ income, which was still down in November. But, it was offset by stronger growth in wages and salaries, which increased 0.4 percent for the month. For manufacturers, total wages and salaries rose from $754.3 billion to $759.1 billion. This figure has gradually moved higher. Six months ago, wages and salaries in the sector were $744.8 billion, and they moved steadily higher from the averages of $707.1 billion and $735.4 billion in 2011 and 2012, respectively.

Perhaps disappointingly, the year-over-year pace of personal income continues to decelerate, down from 3.4 percent in October to 2.3 percent in November. In contrast to personal spending, this was the lowest annual pace of the year. Through the first 11 months of 2013, the annual pace has averaged 3.2 percent, down from the 4.2 percent rate experienced in all of 2012.

With personal spending outstripping personal income, the savings rate has fallen in each of the past two months, down from 5.1 percent in September to 4.5 percent in October to 4.2 percent in November.

Overall inflationary pressures remain minimal, with prices for personal consumption expenditures (PCE) unchanged for the second month in a row. The year-over-year rate of PCE growth was just 0.9 percent, and when you exclude food and energy, the annual rate of core PCE growth was 1.1 percent. Much as we have seen in recent consumer and producer price data, inflation remains below the Federal Reserve’s 2 percent target rate, which frees the Fed up to pursue its highly accommodative policies.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)


Federal Reserve: Manufacturing Production Continues to Accelerate, Up 0.6 Percent in November

12.16.13

The Federal Reserve Board said that manufacturing production increased 0.6 percent in November, building on the 0.5 percent gain seen in October. This was the fifth consecutive monthly gain in manufacturing output, with the sector recovering from weaknesses seen in the spring months. Year-over-year growth in manufacturing production has definitely improved from the 1.2 percent pace experienced in July to 2.9 percent in November.

Manufacturing capacity utilization has also increased over the past few months, up from 75.7 percent in July to 76.4 in October to 76.8 percent in November. This was the highest level since March 2008 for the manufacturing sector.

Durable and nondurable goods production were both higher in November, up 0.8 percent and 0.5 percent, respectively. The strongest increase in output was seen in motor vehicles and parts production, which rose 3.4 percent for the month. Other sectors with stronger production in November included wood products (up 3.1 percent), textile and product mills (up 1.7 percent), nonmetallic mineral products (up 1.3 percent), fabricated metal products (1.0 percent), chemicals (up 0.9 percent), electrical equipment and appliances (up 0.9 percent), furniture and related products (up 0.9 percent), and petroleum and coal products (up 0.9 percent), among others.

There were also six manufacturing sectors that had declining output for the month. These segments were apparel and leather (down 0.4 percent), aerospace and other miscellaneous transportation (down 0.2 percent), computer and electronic products (down 0.2 percent), primary metals (down 0.2 percent), and printing and support (down 0.1 percent).

The overall industrial production data also grew strongly, up 1.1 percent in November. This was much stronger than the 0.1 percent increase in October, and it was slightly higher than consensus expectations. The higher figure was boosted by sharp gains in mining and utility production, up 1.7 percent and 3.9 percent, respectively.

The bottom line in this data is that the manufacturing sector appears to be picking up some steam as we end 2013, a trend that we have observed since the beginning of the third quarter. Given the softness in production demand that we saw over much of the past year, the news of accelerated output is entirely welcome. Most importantly, manufacturers continue to be cautiously optimistic about 2014.

With that said, there is also some tentativeness in the marketplace. After all, we have begun each of the past few years with the belief that the sector was finally beginning to get some traction, only to be let down. Policymakers need to harness the momentum of these gains by pursuing pro-growth measures and policies that will allow manufacturers to continue to expand and compete globally.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)


Producer Prices Continue to Ease, Down for the Third Straight Month in November

The Bureau of Labor Statistics reported that producer prices for finished goods were down 0.1 percent in November, extending the declines observed in September and October. On a year-over-year basis, producer prices have risen just 0.7 percent, illustrating the extent to which inflationary pressures have become so modest.

The decrease was once again largely attributable to reduced energy costs. The price of finished energy goods were off 1.5 percent and 0.4 percent in October and November, respectively. Gasoline prices were down 3.8 percent and 0.7 percent in those same months. Indeed, the price of West Texas intermediate crude fell from an average of $106.29 per barrel in September to $100.54 and $93.86 per barrel in October and November, respectively. The producer price index data reflect this decline with energy costs declining at the intermediate and crude levels, as well.

The cost of food was unchanged in November. Increased producer prices for beef, eggs, pork, and turkeys were offset by lower costs for bakery products, chickens, fruits, vegetables, and shortenings.

For manufacturers, raw material costs were down 0.6 percent in November, with input prices off 0.1 percent over the past 12 months. As such, the manufacturing sector continues to benefit from the recent deceleration in pricing pressures.

With that said, on a year-over-year basis there were a few instances where producer price increases have been somewhat significant. For instance, there were following manufacturing sectors experienced the largest increases in costs over the past 12 months: wood products (up 5.5 percent), leather and allied products (up 3.8 percent), nonmetallic mineral products (up 3.0 percent), paper (up 3.0 percent), plastics and rubber (up 2.3 percent), textile product mills (up 2.0 percent), and apparel (up 1.8 percent). Petroleum and coal products experienced the largest year-over-year decline in costs (down 4.0 percent) on reduced crude prices, with primary metals (down 2.0 percent) and food (down 1.3 percent) manufacturers also having lower costs over the past year.

In conclusion, this data is further evidence that inflation is not a significant problem, at least for right now. The Federal Reserve will meet next week to discuss monetary policy changes (where it may or may not begin tapering its asset purchases), and it will be encouraged by the fact that prices have stayed well below its target of 2 percent or less. The annual rate of core inflation – which excludes food and energy costs – was 1.3 percent according to this report, down from 1.4 percent the month before.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)


Producer Prices Drop in October for Second Consecutive Month

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.

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)


Lower Gasoline Costs Push Consumer Prices Down in October

The Bureau of Labor Statistics said that consumer prices declined 0.1 percent in October, the first decrease in six months. The decrease was almost entirely attributable to lower gasoline prices, which were off 2.9 percent for the month. 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. (It has fallen further since then, closing at $93.34 per barrel yesterday.) Total energy costs were down 1.7 percent in October, with electricity prices up 0.1 percent and piped-in natural gas energy prices down 1.0 percent.

Food prices edged higher by 0.1 percent in October after being unchanged in September. Food costs have risen very modestly over the past 12 months, up just 1.3 percent year-over-year. In October, the increased cost for meats, poultry, fish and eggs (up 0.6 percent) was mostly offset by lower prices for cereals and baking products (down 0.4 percent) and dairy products (down 0.2 percent).

Outside of food and energy, components with the greatest year-over-year price increases have included alcoholic beverages, education and communication services, medical care services, recreation services, rent for one’s primary residence, tobacco and smoking products, and transportation services.

The bottom line, though, is that overall consumer prices have risen just 0.9 percent over the past 12 months, decelerating from 2.0 percent in July and 1.2 percent in September. Much of this easing has come from reduced energy costs, with the energy index down 1.1 percent from July to October. Excluding food and energy, core inflation is currently 1.7 percent, a pace that was unchanged from the month before.

This suggests that inflation remains quite modest, with core inflation below the Federal Reserve’s stated target of 2 percent. Indeed, core inflation has not exceeded 2 percent since July 2012. This should allow the Federal Reserve to continue to pursue “highly accommodative” policies, even as it seeks to “taper” (or slow) its asset purchases at future Federal Open Market Committee (FOMC) meetings. In his speech at last night’s National Economists Club, Fed Chairman Ben Bernanke reiterated the FOMC’s commitment to keeping short-term interest rates essentially zero for the foreseeable future, perhaps beyond when the unemployment rate hits 6.5 percent.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)


The Federal Reserve Makes No Moves, as Expected, at its October Meeting

As expected, the Federal Open Market Committee (FOMC) did not make any changes to its monetary policy at its October 29-30 meeting. The Federal Reserve will continue to purchase $85 billion in long-term and mortgage-backed securities each month, and its goal of maintaining “highly accommodative” policies will not be altered until the unemployment rate hits 6.5 percent and/or long-term inflation exceeds 2.5 percent. As such, this means that short-term interest rates will remain at or near zero percent throughout 2014, and perhaps into 2015.

The guessing game, of course, is when the FOMC will begin to taper its monthly purchases of long-term assets. After the surprise non-taper decision at its September meeting, the current thinking is that the level of purchases might start to move lower as soon as the December 15-16 FOMC meeting, but more than likely, tapering will not begin until after either the January 28-29 or March 18-19 meeting. Given the concern about the government shutdown’s impacts on growth in the decision not to taper at the September meeting, the Fed might opt to see how the next budget impasse might get resolved in early 2014 before its decides to act.

Fortunately, pricing pressures remains low, as we have seen in recent consumer and producer price data. Core inflation remains below 2.0 percent – the stated goal of the Federal Reserve. This allows the FOMC to attempt to stimulate higher growth, pursuit to its dual mandate of tackling both inflation and unemployment. While the Fed found that “economic activity has continued to expand at a moderate pace,” it wants to wait until it sees “more evidence that progress will be sustained before adjusting the pace of its purchases.” Indeed, unemployment remains high, and government spending continues to be a restraint on growth.

Once again, Esther L. George, the president of the Kansas City Federal Reserve Bank, was the lone dissenter to the FOMC’s actions. Ms. George is worried about long-term inflationary pressures that might stem from accommodative monetary policies, and she would prefer that the Fed begin to taper its purchases now rather than later.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)


Reduced Food Costs Push Producer Prices Lower in September

The Bureau of Labor Statistics reported that producer prices for finished goods were off 0.1 percent in September. This compares to 0.3 percent growth in August. The higher figure in August and lower number in September both corresponded to shifts in food prices, up 0.6 percent and down 1.0 percent, respectively, for the two months. The decline in food costs in September was largely due to lower costs for fresh and dry vegetables, with beef, poultry, dairy and soft drink costs also down for the month.

Finished energy costs were higher in both August and September, up 0.8 percent and 0.5 percent, respectively. Crude energy costs increased 2.0 percent for the months, led by higher crude petroleum prices. Indeed, the price of West Texas intermediate crude oil rose from an average of $95.77 per barrel in June to averages of $106.57 and $106.29, respectively, in August and September. (They have subsequently fallen, with the price closing at $98.68 a barrel yesterday.)

For manufacturers, raw material costs were down 0.5 percent in September, with input prices down 0.2 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 prices. These manufacturers included the following sectors: wood products (up 4.6 percent), leather and allied products (up 4.0 percent), nonmetallic mineral products (up 3.4 percent), paper (up 3.3 percent), apparel (up 2.7 percent), and plastics and rubber products (up 2.4 percent). In most cases, though, raw material costs over the past 12 months have been less volatile, suggesting that these increases are the result of mostly month-to-month shifts.

Overall inflation continues to be very 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 1.2 percent, unchanged for the past two months.

This news should allow the Federal Reserve to continue its “highly accommodative” monetary policies, with inflationary pressures remaining quite minimal. The Federal Open Market Committee (FOMC)  is currently meeting, with a decision expected tomorrow afternoon. The FOMC is not expected to announce any changes to its current policies, and as such, there should be no surprises, unlike the non-taper decision made at its September 17-18 meeting.

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

ppi

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)


Beige Book: Economy Growing at a Modest to Moderate Pace, Government Uncertainties Tempering Sentiment

The Federal Reserve Board said that “national economic activity continued to expand at a modest to moderate pace” in its latest Beige Book. With that said, eight Fed Districts noting “similar growth rates” while four others experienced a bit slower growth. Those four Districts were the Chicago, Kansas City, Philadelphia, and Richmond Federal Reserve Bank regions. In terms of manufacturing activity, the data reflected a sector that was expanding overall. Automotive and aerospace were bright spots, with positive stories for high-tech, energy, heavy equipment, and steel. Yet, the demand for fabricated metals and construction materials was mixed.

Government uncertainties were mentioned several times in the Beige Book. Examples included the following comments:

  • “Contacts across Districts generally remained cautiously optimistic in their outlook for future economic activity, although many also noted an increase in uncertainty due largely to the federal government shutdown and debt ceiling debate”
  • “Several Districts reported that contacts were cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally.”
  • “While there was little immediate disruption from the federal government shutdown, [manufacturing] contacts were worried about the potential impact if the closing became prolonged.”

Hiring was growing modestly overall, with employment growth in the manufacturing sector somewhat spotty. Specifically, the report says the following:

In manufacturing, Boston indicated that hiring primarily was for replacement or to fill key needs, New York noted slower job growth, and Chicago reported that manufacturers were cutting back on overtime. Dallas cited scattered reports of hiring in high-tech, fabricated metals, and food manufacturing.

Overall wage and pricing pressures were somewhat minimal.  However, there were some upward wage pressures for some highly-skilled employees, including those in the manufacturing sector. Meanwhile, at least two Districts noted that manufacturing “capital outlays were primarily for productivity enhancing investments.”

In other analysis, consumer spending continued to grow modestly, with motor vehicle sales being one of the bright spots. Retails were mostly upbeat about the upcoming Christmas season. Construction spending continued to improve, but a “number of Districts reported concerns from homebuilders and realtors over rising mortgage rates.” At the same time, nonresidential construction activity was more varied, but up on balance.

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

VN:F [1.9.22_1171]
Rating: 0.0/5 (0 votes cast)


A Manufacturing Blog

  • Categories

  • Connect With Manufacturers

            
  • Blogroll