The economy remains a mixed bag for manufacturers, with job numbers drawing back for the second month this year. The numbers indicate obstacles still stand in the way of unleashing the economic potential of the manufacturing sector. The Bureau of Labor Statistics reported that manufacturing employment declined by 16,000 in February, somewhat offsetting the 23,000-worker increase observed in January. In addition, data revisions subtracted another 13,000 workers from the December and January original estimates. As such, manufacturers have added just 7,000 net new workers year-to-date through the first two months of 2016, a sluggish pace that speaks to the ongoing challenges seen in the sector from the strong U.S. dollar and falling commodity prices. Read More
The Institute for Supply Management (ISM) said that manufacturing activity has now contracted for five straight months. The manufacturing purchasing managers’ index increased from 48.2 in January to 49.5 in February but remained below the important threshold of 50 which would indicate the start of expansion. In that regard, this report continued to show weaker-than-desired data for manufacturers, with the sector challenged by global headwinds and reduced commodity prices. Indeed, exports (down from 47.0 to 46.5) remained in contraction territory, hurt by the strong dollar and economic softness for manufacturing goods to key markets.
Yet, this latest release also offered some signs of encouragement. For one thing, the headline index was higher than the consensus expectation of roughly 48.5, indicating that respondents were perhaps less downbeat than predicted. At the same time, some of the underlying data reflect stabilization in activity from prior months. For instance, new orders (unchanged at 51.5) and production (up from 50.2 to 52.8) have now expanded for two consecutive months, with the latter growing at its fastest pace since August. Moreover, the pace of decline for hiring (up from 45.9 to 48.5) slowed in February, and pricing pressures (up from 33.5 to 38.5) remain virtually nonexistent.
This does not mean that manufacturing’s struggles are over, but this report does offer a glimpse of cautious optimism, with the ISM data coming in a bit stronger than anticipated. Even with this finding, manufacturers remain anxious in their economic outlook overall, and other reports continue to highlight softness in the marketplace. With that in mind, manufacturing leaders remain focused on implementing pro-manufacturing policies, including those outlined in the NAM’s “Competing to Win” document in this all-important election year and beyond.
The Kansas City Federal Reserve Bank said that manufacturing activity in its district has declined for 12 straight months. The composite index of general business conditions fell from -9 in January to -12 in February, its lowest level since April 2009. Reduced crude oil prices, the strong dollar and weaknesses abroad have pressured the sector’s performance. The data were negative across-the-board, including new orders (up from -27 to -15), production (unchanged at -8), shipments (down from -7 to -11), exports (down from 1 to -6), employment (down from -7 to -20) and the average employee workweek (down from -7 to -14). Half of all respondents said that they experienced no change in new orders for the month, with 30 percent noting declining sales. As such, it should not be a surprise that manufacturers in the region remained anxious.
With that said, manufacturing leaders in the Kansas City Fed area were cautiously positive in their outlook for the next six months, but not overwhelmingly so. The forward-looking composite index edged down from 5 to 4. At the same time, new orders (up from 13 to 15), production (up from 14 to 16) and shipments (up from 18 to 20) are expected to increase at decent rates in the months ahead, which should provide some encouragement. Yet, other indicators reflect ongoing softness in the market. For instance, the labor market is anticipated to remain weak, including hiring (down from 5 to 3) and the average workweek (up from -8 to 1), and capital spending is seen declining (down from -1 to -9). Exports (down from 2 to -1) are also predicted to be slightly negative over the next six months.
The Markit Flash U.S. Manufacturing PMI fell to its slowest pace in more than three years in February, a sign that challenges hitting the sector have not yet abated. The composite measure declined from 52.4 in January to 51.0 in February, and in general, manufacturing activity has decelerated over the course of the past year, down from 55.1 in February 2015. On the positive side, new orders (down from 53.6 to 51.7), output (down from 53.2 to 51.3) and employment (down from 52.8 to 51.5) expanded somewhat, just not as far as we might prefer, with the rate of growth slowing in February for each. On the other hand, exports (down from 51.1 to 49.1) returned to negative territory after two months of progress, a sign of just how much the stronger dollar and weaknesses abroad have dampened international demand and overall sentiment. Read More
The latest data on manufacturing employment provides a bit of encouragement for manufacturers that have been beleaguered by the global slowdown and pullbacks in the energy sector. The Bureau of Labor Statistics said that manufacturing employment rose by 29,000 in January, much stronger than expected at the start of the new year. It was the fourth consecutive monthly job gain and the strongest since November 2014, when manufacturing demand and production were growing more robustly than seen today. There are currently 12.36 million workers in the sector, with manufactures adding 903,000 more employees since the Great Recession. At the same time, it is important to note that employment growth has been quite soft for much of the past year, with the sector adding just 33,000 workers in 2015. Read More
The Institute for Supply Management (ISM) said that manufacturing sentiment remained somewhat negative in January. The purchasing managers’ index for the sector edged marginally higher, up from 48.0 in December to 48.2 in January. It was the fourth straight month with the headline PMI under 50, which would suggest contracting sentiment among manufacturers over that time frame. This mainly reflected deteriorating employment (down from 48.0 to 45.9) and inventories (unchanged at 43.5), with the decline in hiring at its lowest level since June 2009, the last official month of the Great Recession. Indeed, manufacturers continue to worry about the impact of the global slowdown as we start the new year. This can be seen in export growth (down from 51.0 to 47.0). The exports index has contracted in seven of the past eight months on the strong dollar and soft growth abroad. Read More
While Manufacturers had a more positive month than expected, adding 8,000 jobs in December, 2015 will go down one of the softest years for employment growth in the sector since the Great Recession. All in, manufacturers added 30,000 workers on net in 2015, well below the 215,000 workers hired in 2014.
Nondurable goods employment increased by 14,000 workers in December, but total hiring in the manufacturing sector was pulled lower by a reduction of 6,000 employees from durable goods firms. The strongest gains in December were seen in the food manufacturing (up 3,500), miscellaneous durable goods (up 3,500), plastics and rubber products (up 3,300), chemicals (up 2,500) and furniture and related products (up 2,100) sectors. In contrast, machinery (down 6,300), transportation equipment (down 3,300, including a loss of 2,400 for motor vehicles and parts), primary metals (down 2,800) and fabricated metal products (down 1,500) each experienced significant declines for the month. Read More
ADP said that manufacturers added 2,000 workers on net in November, extending the 4,000 increase observed in December. That followed declines in five of the seven months prior to that, highlighting the softness of employment growth in the sector for the year as a whole. Indeed, hiring was essentially flat in 2015, easing sharply after adding 1.35 million workers in 2014. A strong dollar, weaknesses in the energy sector and sluggish export growth have combined to challenge manufacturers in the United States, with demand, production and hiring growth all dampened. Hopefully, we will begin to see a rebound in activity in 2016; although, expectations remain muted with lingering headwinds.
The Empire State Manufacturing Survey reflected contracting levels of activity for the fifth straight month in December, albeit at a slower pace. The composite index of general business conditions improved from -10.7 in November to -4.6 in December. It was the best reading of the headline index since July’s 3.9 figure. The improvement could be seen in growth of shipments (up from -4.1 to 5.5) for the month, which expanded for the first time since July, and a slower rate of decline for new orders (up from –11.8 to -5.1). Looking more closely at the new orders figures, the percentage of respondents saying that their sales had declined for the month has fallen from 37.2 percent in October to 30.6 percent in this latest report. That represents progress of some sort, but it must also be compared to the one-quarter of those completing the survey who had increased new orders. Read More
The National Federation of Independent Business (NFIB) said that optimism was unchanged in October. The Small Business Optimism Index remained at 96.1 in October, representing some progress since the 94.1 reading observed in June. Coincidently, the index was 96.1 in October 2014, as well. Overall, it is also clear that small business owners remain anxious about the economy, with index values under 100 typically coinciding with softer economic growth. With that said, there were also positive developments for the month. For instance, the percentage of respondents saying that the next three months were a “good time to expand” increased from 12 percent to 13 percent, its highest level since February. This figure has trended higher over the past year, averaging 9.8 for all of 2014 and 11.6 year-to-date for 2015. Meanwhile, the percent planning capital expenditures over the next three to six months rose from 25 percent to 26 percent. Read More