Here is the summary for this week’s Monday Economic Report:
Financial markets have been rocked by worries about slowing economic growth, particularly in Europe. The Dow Jones Industrial Average has fallen 4.2 percent so far this month, declining to 16,321.07 yesterday on Columbus Day. The concern started after the Federal Open Market Committee (FOMC) released the minutes from its September 16–17 meeting last Wednesday. Indeed, the participants discussed how softer economic activity and geopolitical events could risk U.S. economic progress.
Then, on Thursday, the International Monetary Fund (IMF) slightly downgraded its global outlook, with Asia, Europe and South America growing slower than expected three months ago. The IMF now expects world output to expand 3.3 percent and 3.8 percent in 2014 and 2015, respectively, down from 3.4 percent and 4.0 percent as estimated in its July report.
Interestingly, the IMF raised its forecast for the United States, with the estimate of real GDP growth for 2014 up from 1.7 percent to 2.2 percent. This reflects recent strength in the U.S. economy, particularly when compared to other nations. To be fair, the IMF had more optimistic expectations for growth coming into this year, projecting 2.8 percent growth in 2014 in its January report. After disappointing growth in the first quarter, however, it lowered its outlook projections, much like everyone else.
Otherwise, last week was light on economic indicators. Of the ones that were released, the data were mostly mixed. California manufacturers reported a slight easing in the pace of new orders and output, particularly for durable and high-tech industries. Nonetheless, the data still reflect relatively health gains in activity, and hiring in California ticked higher.
In contrast, net hiring in the sector slowed in August nationally. On the positive side, manufacturing job openings have risen steadily this year after bottoming out in February, rising to 297,000 postings in August. These gains were part of a larger upward trend, with total nonfarm job openings increasing to their highest level since January 2001.
Beyond those measures, we learned that wholesale sales were somewhat soft in August—not unlike a number of other indicators. In addition, consumers were less willing to take on credit card debt. At the same time, wholesale spending has increased 5.9 percent over the past 12 months, indicating decent growth, with consumer indebtedness rising 6.8 percent. As such, it is clear that Americans have continued to spend, even if the pace lessened somewhat in August.
After some unexpectedly soft data in August, we will be looking for better housing starts and industrial production figures for September, both of which come toward the end of this week. Industrial production is expected to increase around 0.3 percent, and housing starts should once again exceed an annualized 1 million units. There will also be manufacturing surveys from MAPI and the New York and Philadelphia Federal Reserve banks. Beyond those indicators, other highlights include the latest data on consumer and producer prices, consumer sentiment, retail sales and small business optimism.
Chad Moutray is the chief economist, National Association of Manufacturers.