Tag: Kansas City Fed

Monday Economic Report – March 31, 2014

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

The U.S. economy grew 2.6 percent in the fourth quarter, according to the most recent revision, and for 2013 as a whole, real GDP growth was a rather lackluster 1.9 percent. Consumer spending, business investment and net exports were bright spots in the fourth quarter, with reduced government spending subtracting nearly one percentage point from growth.

Meanwhile, business economists predict real GDP growth of 2.8 percent on average for 2014, with 1.9 percent growth in the current quarter. (My own forecast is marginally higher for both, up 3.0 percent for the year and 2.1 percent for the first quarter of 2014.) Weather-related slowdowns account for the deceleration in activity, particularly for manufacturers, in the current quarter. However, modest growth is expected to resume once temperatures warm up, and we have already begun to see that. The National Association for Business Economics (NABE) Outlook Survey also suggested that the industry should grow 3.2 percent in 2014 and 3.4 percent in 2015, which would indicate a pickup from the current pace.

The latest manufacturing surveys show a rebound in sentiment after softness from December to February. The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) slowed a bit, down from 57.1 in February to 55.5 in March. Despite the lower figure, new orders and production growth continued to grow relatively strongly, with overall manufacturing activity improved from January’s winter storms. A similar recovery was seen in regional data from the Kansas City Federal Reserve Bank, mirroring the findings from New York and Philadelphia the week before. Still, not everyone has seen improvements yet. The Richmond Federal Reserve reported lackluster growth in sales and output, with weather continuing to “wreak havoc” for many manufacturers. In addition, while new durable goods orders were up a strong 2.2 percent in February, sales growth increased at the less-than-robust rate of just 0.2 percent when transportation orders were excluded.

On the consumer front, the data were mostly positive, but with some caveats. Personal income and spending both increased 0.3 percent in February, with each rising 3.0 percent over the past 12 months. This was a decent pace, but increased purchases of nondurable goods and services mainly fueled spending growth in February. Durable goods spending declined for the third month in a row. In terms of consumer confidence, the two reports out last week were mixed. The Conference Board’s measure of consumer sentiment reached a six-year high; yet, labor market worries dampened enthusiasm for the current environment. Likewise, the University of Michigan and Thomson Reuters reported that consumer sentiment edged lower in March, with employment and income growth also weighing on respondents’ minds. In both surveys, however, Americans are more confident today than in the fall during the government shutdown.

Looking overseas, Markit released preliminary manufacturing PMI data for China and the Eurozone. Chinese manufacturing activity has now contracted for three consecutive months, with March’s pace being the slowest since July. The data mirror other recent indicators, including industrial production, fixed asset investment and retail sales, which have slowed. As such, they all suggest that real GDP might fall below the 7.7 percent rate in the fourth quarter. (First-quarter real GDP for China will be released on April 15.) Meanwhile, European manufacturers have seen expanding activity levels for nine straight months, even as Eurozone PMI values eased slightly in March. New orders and production remain strong in Germany, and, of note, French manufacturers were positive in their sentiment for the first time since June 2011.

This week, the focus will be on the March jobs numbers, which will come out on Friday. The consensus expectation is for nonfarm payroll growth of around 190,000, with manufacturers hiring somewhere near the 12,000 average experienced in the sector since August. In addition, the Institute for Supply Management (ISM) is expected to show a slight rebound in manufacturing PMI activity in its March data, up from 53.2 in February. Other highlights this week include the latest data on construction spending, factory orders and international trade.

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

gdp forecast - mar2014

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


Kansas City Fed: Manufacturing Activity Picked Up in March

The Kansas City Federal Reserve Bank said that manufacturing activity picked up in March, expanding for the third straight month. The composite index of general business activity rose from 4 in February to 10 in March. This was the highest point since February 2012. The largest increase was in the production index, which increased from 3 to 22. Indeed, the percentage of survey respondents who said that their output had declined in the month fell from 28 percent in February to 11 percent in March. This improvement was likely the result of better weather, which caused a number of delays in production in the previous report.

In terms of other indicators, there was also notable progress for new orders (up from 5 to 13), shipments (up from 10 to 16), and exports (up from -1 to 6). As with the production index above, the shifts were largely due to fewer people saying that there were decreases. For instance, 39 percent of those taking the survey said that their new orders had increased in the month (up from 35 percent last month); whereas, 14 percent noted decreased sales (down from 24 percent).

Hiring was one area where weaknesses remain. The index for the number of employees declined has declined from 11 in January to 3 in February to zero in March. Two-thirds of respondents said that their employment levels were unchanged, with the other answers nearly split equally. Moreover, looking ahead six months, employment growth was also only barely positive on net, unlike in several other regional surveys.

Fortunately, other forward-looking measures are more upbeat. Nearly half of those taking the survey anticipate increased production, shipments, and new orders over the next six months. Roughly one-quarter of survey participants said that they plan to increase capital spending, with 15 percent anticipating declines. One other finding that was surprisingly soft was export growth, with just 11 percent of Kansas City Fed manufacturers saying that they expect increased international sales. Hopefully, this figure improves in coming months.

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

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


Monday Economic Report – March 3, 2014

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

The U.S. economy grew 2.4 percent in the fourth quarter, down from the earlier estimate of 3.2 percent. Given some of the recent weaker manufacturing, retail and housing data, the downward revision was largely expected. Still, there are some positives in the report, with strength in consumer spending, business investment and net exports. Fixed investment was higher in this revision, which was welcome news. Federal government spending accounted for the biggest drag on growth during the fourth quarter, subtracting one percentage point from the total figure.

The bottom line is that real GDP increased 3.3 percent in the second half of 2013, providing some momentum for growth moving into this year. While weather and other factors have dampened the economy recently (and will also reduce real GDP in the current quarter), we still expect 3.0 percent growth for 2014. Manufacturers continue to be mostly upbeat about demand and production over the coming months.

Despite such optimism in the outlook for the year, the current environment for manufacturers clearly has its challenges. Weather has negatively impacted production and shipments in a number of regions around the country, and surveys from the Dallas, Kansas City and Richmond Federal Reserve Banks all observed some easing in activity in February. This followed similar reports from the New York and Philadelphia Federal Reserve Banks the week before. Meanwhile, the Census Bureau has reported lower new durable goods orders for two straight months, with poor weather conditions likely a factor, particularly for auto sales. At the same time, new durable goods orders excluding transportation were higher, suggesting that the broader manufacturing market was slightly better than the headline figure indicated.

Some of the other data remain mixed. New home sales were up sharply in January to their highest level since July 2008, but year-over-year growth was more modest, and inventories of new homes have fallen over the past few months. Nonetheless, the positive report on new home sales stands in contrast to much weaker residential construction figures of late, including housing starts and existing home sales, which have seen negative impacts from the weather. Similarly, the two major reports about consumer confidence moved in opposite directions, with the Conference Board’s measure lower in February and the University of Michigan’s figure edging slightly higher. Doubts about income and labor growth have possibly fed some anxieties in sentiment in both surveys, but the two reports differ in their findings about the economic outlook.

This week, the focus will be on manufacturing activity, employment growth and international trade. We will get February Purchasing Managers’ Index (PMI) data from the Institute for Supply Management (ISM) later this morning. After falling from 56.5 in December to 51.3 in January, the ISM PMI is expected to increase modestly, still indicating weaknesses in new orders and production for the month. On the trade front, we will be looking for better manufactured goods exports in 2014, improving on the modest 2.4 percent growth rate seen in 2013. Still, manufactured goods exports hit an all-time high last year, providing a positive for economic growth.

The biggest news of the week will come on Friday with the release of new jobs numbers. Nonfarm payroll growth has been soft over the past two months, with just 75,000 and 113,000 net new workers added in December and January, respectively. The consensus expectation is for roughly 165,000 nonfarm workers added in February. In contrast, manufacturing job gains have been fairly decent over the past six months, averaging 15,500 since August, and we should get modest gains again in February. One of the bigger conversation pieces will be whether the unemployment rate falls to 6.5 percent in February, which is the rate specified in the Federal Reserve Board’s forward guidance. (Either way, look for the Federal Open Market Committee to change its guidance at its next meeting.) Other highlights this week include the latest data on construction spending, factory orders, personal income and spending and productivity.

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

personal consumption - mar2014

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


Kansas City Fed: Manufacturing Activity Expanded Modestly for the Second Straight Month

Manufacturing activity expanded for the second straight month in the Kansas City Federal Reserve Bank district. With that said, the composite index of general business activity eased slightly from 5 in January to 4 in February. The underlying data were largely mixed, but with modest growth overall.

The pace of shipments (up from 3 to 10), production (up from -8 to 3), and the average workweek (up from -6 to 1) improved for the month, but new orders were unchanged at 5. A larger percentage of survey respondents said that their sales were flat in February (39 percent) than those who noted increases (35 percent), with nearly one-quarter observing declines. Export orders contracted barely (down from 4 to -1); whereas, hiring slowed (down from 11 to 3).

The sample comments were equally varied, but more negative than positive. While some manufacturers felt that business was improving, others cited problems due to weather, financing, economic uncertainties, the tax and regulatory environment, and delivery times.

Despite some current challenges, manufacturers in the Kansas City Fed region continued to be cautiously optimistic about the coming months. Nearly half expect shipments and production will be higher six months from now. Moreover, the percentages feeling that new orders, capital spending, and employment levels will be increased in that time frame was 40 percent, 35 percent, and 27 percent, respectively. Still, that positivity wavered somewhat in February, with the forward-looking composite index dropping from 26 to 11.

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

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


Monday Economic Report – January 27, 2014

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

According to the latest data, manufacturers contributed $2.03 trillion to the economy in 2012, or 12.5 percent of GDP. This was up from $1.56 trillion in 2000 and $1.92 trillion in 2011. As such, it suggests that manufacturing remains quite strong in the United States, with output continuing to expand and recovering from the falloff during the recession. In fact, manufacturing in the United States would be the eighth-largest country in the world if you were to compare manufacturing’s contribution with worldwide GDP values. Nations with GDP greater than U.S. manufacturing’s contribution were the United States, China, Japan, Germany, France, the United Kingdom and Brazil.

Looking at more current data, there were two manufacturing developments of note in the data released last week. First, Chinese manufacturing activity contracted slightly for the first time since July, spooking financial markets. This reduction in the preliminary Purchasing Managers’ Index (PMI) data stemmed largely from fewer new orders and exports, and it provided fodder for those worried about deceleration in China’s economy. (This also fed anxieties about growth in the emerging markets in general.) Yet, Chinese manufacturing output remained expansionary, albeit at a slower pace than the month before, and production has been positive for six straight months.

The second notable trend was the negative impact of colder weather on U.S. production in January. Both the Kansas City Federal Reserve’s survey and the Markit Flash U.S. Manufacturing PMI data indicated weaker output for the month, with winter shutdowns cited as one of the causes. We would expect such changes due to poor weather conditions to be temporary, and for the most part, manufacturers in the United States remain mostly upbeat about new orders, shipments, employment and capital spending moving forward. These sentiment surveys, as well as other similar ones, continue to show improvements in manufacturing sales and output since the beginning of the third quarter, with cautiously optimistic expectations for 2014.

Two indicators released last week support this more upbeat assessment of the U.S. economy’s health. The Conference Board’s Leading Economic Index (LEI) continued to expand in December, rising 3.4 percent in the second half of 2013. One of the stronger elements in this index was the new orders component, particularly as measured by the Institute for Supply Management’s (ISM) PMI reports. Similarly, manufacturing was a significant positive contributor to the Chicago Federal Reserve Bank’s National Activity Index (NAI). This measure has shown strong improvement in the past few months, with overall growth now above its historical trend.

This week will be a much busier one on the economic front. However, much of the focus will be on two separate developments. The first of these will come on Wednesday with the Federal Open Market Committee’s (FOMC) release of its monetary policy statement. This will be the last meeting with Ben Bernanke as the Federal Reserve Board chair, and it is widely expected that the FOMC will continue to taper its purchases of long-term assets, probably down from $75 billion each month to $65 billion. Then, on Thursday, we will get our first glimpse of fourth-quarter real GDP growth numbers. The consensus expectation is for growth of at least 2.5 percent in the final quarter of 2013, down from 4.1 percent in the third quarter.

Other highlights for the week include new manufacturing surveys from the Dallas and Richmond Federal Reserve Banks and consumer confidence data from both the Conference Board and the University of Michigan. In addition, we will get the latest updates for new durable goods orders, personal income and spending and state employment.

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

manufacturing value-added - jan2014

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


Kansas City Fed: Manufacturing Rebounded in January, but with Weather-Related Output Declines

The Kansas City Federal Reserve Bank reported that manufacturing sentiment rebounded in January from the brief contraction in December. The composite index of general business activity rose from -3 to 5. The improvement came from growth in new orders (up from 1 to 5), shipments (up from -10 to 3), and exports (up from -6 to 4). While none of these figures suggest robust growth, it was nice to see some progress, particularly for those measures that shifted from contraction to modest gains.

The data also show a continued drop in output, which the Kansas City Fed attributes to “weather-related delays.” The indices for production and the average employee workweek both contracted for the second straight month.

Nonetheless, even with the decline in production in January’s report (which is probably temporary), manufacturers in the District continued to be mostly upbeat about the coming months. Several of the sample comments provided by the Kansas City Fed tend to back this up. As one respondent said, “Weather and year-end slowdowns were a factor in how the year ended. We are cautiously optimistic that 2014 will bring improvement, or at least a situation where customers complete their inventory reductions and must purchase what they are consuming.”

Along those lines, the forward-looking indicators were generally higher, reflecting the mostly upbeat sentiment seen in the comments. The composite measure of business activity six months from now rose from 15 to 26. That was the fastest pace for that index since February 2011. Indeed, the future-oriented subcomponents were all higher, including new orders (up from 24 to 35), shipments (up from 24 to 35), employment (up from 15 to 29), and capital spending (up from 12 to 26). On the negative side, pricing pressures for raw materials were also anticipated to accelerate, up from 27 to 47.Yet, overwhelming, the data support the pickup in activity that we were seeing nationally at the end of 2013.

In other findings, the sample comments tend to highlight the importance of the global market for growth, but they also focus on some challenges. This includes the challenge of finding new workers, and government uncertainty related to the implementation of the health care law and the “lack of a clear direction about taxes and economic policy.” That commenter suggested that such uncertainties are “causing businesses to hold back.”

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

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


Monday Economic Report – December 23, 2013

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

The U.S. economy grew a surprisingly strong 4.1 percent in the third quarter, according to the most recent revision of real GDP from the Bureau of Economic Analysis. While inventory replenishment accounted for a large portion of this increase, consumer and business spending continue to boost overall economic activity. I expect real GDP growth of 2.5 percent in the current (fourth) quarter, essentially the same pace for 2013 as a whole. For 2014, the economy should expand by 3.0 percent, which would be the first year since 2005 that the annual average would grow by that amount.

A number of data sources supported the view that economic activity has begun to improve, continuing the accelerating pace in the second half of 2013. For instance, manufacturing production rose 0.6 percent in November and 2.9 percent year-over-year. On the latter figure, the annual pace has made definite progress since July’s 1.2 percent pace. The Manufacturers Alliance for Productivity and Innovation (MAPI) predicts that industrial production will accelerate to 3.1 percent in 2014 and perhaps 4.1 percent in 2015.

A number of regional surveys show manufacturers tend to be mostly upbeat about new orders and output in the coming months. This includes the latest reports from the Kansas City, New York and Philadelphia Federal Reserve Banks. The more optimistic future assessment was true despite notable weaknesses in the current environment, particularly in the Kansas City and New York surveys. Similarly, the latest Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) suggested that output growth remained near the more robust pace at the beginning of 2012, with modest growth overall. Meanwhile, we continue to see stabilization in the Chinese and European economies. These releases show hiring growth remains modest at best.

The housing market also bounced back strongly in November. New housing starts soared to 1.09 million units at the annual rate, the highest level since February 2008. Both single-family and multifamily starts were up sharply for the month, and overall, new residential construction has increased nearly 30 percent over the past 12 months. Furthermore, new housing permits have also exceeded 1 million units for two straight months, which should bode well for future activity. The gains in residential activity have also helped to lift homebuilder confidence once more, according to the National Association of Home Builders and Wells Fargo. I expect that housing will continue to be one of the bright spots in the economy, particularly as borrowing costs remain at historic lows and the “sticker shock” of higher rates wears off.

The improvements in the economy have led the Federal Reserve to finally start to pare back its latest quantitative easing program. At the conclusion of its December Federal Open Market Committee (FOMC) meeting, the Federal Reserve decided to begin tapering its purchases of long-term and mortgage-backed securities, down from $85 billion each month to $75 billion starting in January. The expectation is that this will set in motion future reductions in these purchases, with all buying ending sometime in mid-2014. However, the Federal Reserve will still be pursuing a “highly accommodative” monetary policy, with short-term interest rates near zero for the foreseeable future. In his press conference afterward, Federal Reserve Board Chairman Ben Bernanke suggested short-term rates might not move up until after the unemployment rate hits 6.5 percent, which it is not likely to do until the end of 2014. He made a similar comment in his speech to the National Economists Club in November. Fortunately, pricing pressures remain quite low for now, providing the Federal Reserve with more time to pursue its stimulative measures.

This week will be a shortened one due to the Christmas holiday, but there will still be some key data releases. Later this morning, we will get the latest reads on personal spending and consumer confidence, both of great importance in terms of holiday spending. Sentiment had improved in the initial estimate from the University of Michigan and Thomson Reuters, rebounding from the dips in perceptions seen during the government shutdown. This should help retail sales, which have grown modestly of late. We will also learn more about the health of the manufacturing sector with a new report on durable goods sales and the latest survey from the Richmond Federal Reserve Bank.

Chad Moutray is the chief economist, National Association of Manufacturers. Due to the holidays, there will be no report issued during the week of December 30. The schedule will resume on Monday, January 6.

housing starts and permits - dec2013

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


Kansas City Fed: Manufacturers Pull Back in December, Perhaps Temporarily

The Kansas City Federal Reserve Bank reported that manufacturing activity contracted somewhat in December, the first decline in six months. At the same time, the bank cautioned against reading too much into the decrease. Chad Wilkerson, vice president and economist at the Kansas City Fed said, “The drop in regional factory activity appears like it will be temporary, and was at least partly driven by bad weather.” He went on to add, “Firms remain generally optimistic about the first half of 2014, despite continued uncertainty about fiscal policy and regulations.”

The drop in activity in December was across-the-board. Production (down from 11 to -17), shipments (down from 3 to -14), export sales (down from -4 to -6), and the average workweek (down from 5 to -2) all contracted for the month. Meanwhile, new orders shifted from strong growth in November (15) to being flat in December (zero). In terms of employment growth, the pace of hiring also decelerated a bit (down from 6 to 2), but remains slightly positive.

Despite the decreases in December, manufacturers in the Kansas City Fed region continue to reflect optimism for the next six months. The forward-looking composite index rose from 12 to 14, and measures for expected production (up from 21 to 29), shipments (up from 27 to 30), and new orders (up from 16 to 22) grew at a stronger pace. In fact, 44 percent of respondents anticipate higher sales in the next six months, with just 21 percent forecasting reductions in their orders.

Even with the increased confidence, those taking the survey remain somewhat hesitant on the hiring front. Thirty percent plan to add new workers in the first half of 2014, but half of them see no changes in their employment levels. Similarly, the percentage of respondents planning increases in their capital expenditures in the next six months dropped from 50 percent in the last survey to 43 percent in this one. On a positive note, each of these indicators suggests that employment and capital investments should continue to grow moving forward, albeit at a slower pace than before.

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

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


Monday Economic Report – November 25, 2013

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

The latest forecast from the Organisation for Economic Co-operation and Development (OECD) calls for continuing improvements in markets around the world, with global GDP accelerating from 3.7 percent in 2013 to 5.5 percent in 2014. According to the OECD, the U.S. economy, which should grow by 2.1 percent this year, is predicted to strengthen to 3.2 percent next year. If true, it would be the first year since 2005 that annual output would expand by more than 3.0 percent. However, weaknesses persist in emerging markets, and continued political risks could dampen the prospects for better growth.

The latest data tend to reflect the recent pickup in the global economy. Manufacturers in China and Europe have seen improvements in sales, exports and production over the past few months as their respective economies have begun to stabilize. At the same time, manufacturing activity in the United States has accelerated in the past few months from midyear weaknesses. The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) rose from 51.8 in October to 54.3 in November, with output at its fastest pace since February. Meanwhile, surveys from the Kansas City and Philadelphia Federal Reserve Banks have reported expanding activity levels since the summer, even as some weaknesses continue. Hiring growth remains quite soft, with new orders slowing in the Philadelphia region and exports falling for manufacturers in the Kansas City region. Nonetheless, respondents tend to be mostly upbeat about the sector over the next six months in most sentiment surveys, including these.

Consumer spending and the rebound in the housing sector have both been bright spots in the economy over the past few years, but in data released last week, the two were moving in opposite directions. Retail spending increased 0.4 percent in October, with year-over-year growth of 3.9 percent. While the annual pace of retail sales has decelerated since June, October’s modest gains were a sign that consumer purchases were beginning to strengthen, especially for automobiles.

In contrast, existing home sales have fallen for two consecutive months, down from an annualized 5.39 million units in July and August to 5.12 million units in October. Higher mortgage rates were to blame for the decrease, with many buyers rushing to close in-process deals during the summer when interest rates were soaring. This made the levels in those months an outlier. The good news is that existing home sales are still on an overall upward pace, and mortgage rates have declined from their early September highs. Of course, long-term interest rates are likely to move higher again in the coming months, which could once again dampen housing purchases. My guess, however, is that homebuyers will become accustomed to the new normal in mortgage rates, which, while higher than earlier in the year, are still at historic lows. This will allow housing to once again move in the right direction.

Monetary policy actions are behind the moves in interest rates. Fortunately, pricing pressures remain extremely modest. Consumer and producer prices were both lower in October, led by declining energy costs. With overall inflation mostly in check, at least for now, the Federal Reserve has been able to utilize highly accommodative measures to pursue its dual mandate of price stability and higher employment. The minutes of its October Federal Open Market Committee (FOMC) meeting and Federal Reserve Board Chairman Ben Bernanke’s remarks at the National Economists Club both suggested that the Federal Reserve does not plan to tighten its monetary policy anytime soon. While the FOMC will probably vote to taper (or reduce) its asset purchases in the coming months, it will keep short-term rates effectively at zero—at least until the unemployment rate hits 6.5 percent. Chairman Bernanke’s address made it clear that 6.5 percent was the threshold at which the Federal Reserve would begin to debate possible changes, and not a “trigger” that would automatically mean increased fund rates. That would suggest “easy money” policies for at least the next year and perhaps beyond.

This week will be a shorter one due to the Thanksgiving holiday, but there will be several important economic releases of note. First, we will finally get housing starts and permits data, which were delayed due to the government shutdown. As noted earlier, residential construction ebbed somewhat during the summer with higher mortgage rates, but the consensus estimate is for roughly 910,000 new starts at the annual rate in October, up from 891,000 in August. There will also be a number of key data points on manufacturing activity, including durable goods orders and regional reports from the Chicago, Dallas and Richmond Federal Reserve Banks. Other highlights include consumer confidence and leading indicators data.

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

retail sales - nov2013

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


Kansas City Fed: New Orders Pick Up Strongly in November

The Kansas City Federal Reserve Bank said that manufacturing activity continues to improve in its region. The composite index of general business conditions edged up from 6 in October to 7 in November. While that figure was not up significantly, it represented the fifth straight month of expansion for the district. The recent progress was led by strength in sales, with the new orders index up from 3 to 15. Production growth was also relatively healthy, albeit with a somewhat slower pace than the month before (down from 14 to 11).

There were still some areas of weakness, however. The pace of shipments declined, down from 14 to 3, with one-third of respondents saying that their shipments were lower in November than in October. At the same time, growth in sales was limited to domestic markets, with new export orders falling in the month (down from 9 to -4).

Meanwhile, on the employment front, hiring (up from -2 to 6) and the average workweek (up from 2 to 5) were both positive, but growing more slowly than other indicators. Indeed, 65 percent of those taking the survey said that their employment levels were flat in November.

In the sample comments, one individual noted, “New regulations and laws are causing costs to increase, creating uncertainty and holding back the creation of jobs, particularly Dodd Frank and health care.” For those who are looking for workers, another respondent added, “It is very difficult to find people. We cannot get people to work even basic jobs, and it is even harder to find skilled positions.”

Looking ahead, manufacturers in the Kansas City Fed region continue to reflect optimism for the next six months. The forward-looking composite index rose from 8 to 12, and the expected measures for production (up from 19 to 21), shipments (up from 15 to 27), and new orders (up from 14 to 16) were higher. Pricing pressures are anticipated to ease a bit from last month. On a positive side, the pace of hiring is expected to accelerate (up from 3 to 20), with 28 percent of respondents saying that they plan to add workers in the coming months. Still, 6 out of 10 of them plan to make no changes to employment.

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