Tag: manufacturing output

Manufacturing Production Expanded More Slowly in June

Manufacturing production increased 0.1 percent in June, its slowest pace since January’s weather-induced decline. In general, manufacturers continue to expand upon the softness earlier in the year, with year-over-year growth of 3.5 percent in June, up from 1.5 percent in January. However, the year-over-year rate was slightly lower than the 3.7 percent pace experienced the month before. Similar trends were seen with manufacturing capacity utilization, which declined from 77.2 percent in May to 77.1 percent in June. While lower for the month, it still represented progress from the 75.5 percent rate seen in January.

In June, the sector-by-sector data were largely mixed, with durable goods output up 0.1 percent but nondurable goods production off by 0.3 percent. Sectors with the greatest monthly growth included furniture and related products (up 1.4 percent), fabricated metal products (up 1.2 percent), primary metals (up 1.2 percent), plastics and rubber products (up 1.2 percent), aerospace and miscellaneous transportation equipment (up 1.1 percent) and nonmetallic mineral products (up 1.0 percent).

In contrast, food, petroleum and coal products (down 2.7 percent); apparel and leather products (down 1.3 percent); beverage and tobacco products (down 0.6 percent); machinery (down 0.5 percent); and motor vehicles and parts (down 0.3 percent) had lower production in June.

On a year-over-year basis, durable goods production has risen by a healthy 5.5 percent in June, an increase from 5.4 percent observed in May. Nondurable goods activity was up a less robust 1.5 percent over the past 12 months, down from 2.1 percent the month before. The largest gains in production over the past year were seen in the following sectors: plastics and rubber products (up 7.5 percent), motor vehicles and parts (up 6.8 percent), fabricated metal products (up 6.2 percent), machinery (up 6.1 percent), furniture and related products (up 5.9 percent), primary metals (up 5.9 percent) and nonmetallic mineral products (up 5.8 percent).

Meanwhile, overall industrial production rose 0.2 percent in June, slower than the 0.5 percent increase in May. On a year-over-year basis, industrial production has grown 4.3 percent. Mining accounted for the largest jump in output, up 0.8 percent for the month and 9.7 percent year-over-year. Utility output declined for the fifth straight month, down 0.3 percent in June but up 1.8 percent year-over-year. Total capacity utilization was unchanged at 79.1 percent.

In conclusion, manufacturers continued to expand output, with the sector recovering from softness earlier in the year. Yet, growth slowed in June, and we would like to see improvements coming from a broader base of the manufacturing sector. In general, manufacturers are cautiously upbeat about production in the second half of this year, but for those projections to materialize, we need to see stronger growth in the U.S. and globally. For that reason, policymakers should focus on those initiatives which will keep the economy growing moving forward.

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

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Manufacturing Labor Productivity in First Quarter Revised to its Highest Point since Early 2012

The Bureau of Labor Statistics said that labor productivity in the manufacturing sector was upwardly revised to 3.8 percent growth in the first quarter. Manufacturing labor productivity was originally estimated to be up 3.3 percent in the quarter, a nice improvement from the 1.3 percent gain in the fourth quarter. Output was also revised higher, up from a preliminary growth figure of 1.8 percent to 2.2 percent. Still, these figures still show the negative impact of weather, particularly when you look at the reduced number of hours worked (down 1.6 percent) in the first quarter. Unit labor costs in the sector declined 0.4 percent, extending the 1.3 percent decrease seen in all of 2013.

Durable and nondurable goods productivity increased 4.1 percent and 3.3 percent, respectively, in the first quarter. Output for durable goods decelerated strongly, down from 6.9 percent growth in the fourth quarter to 2.3 percent in the first quarter. Nonetheless, unit labor costs for durable goods firms declined 1.5 percent, helping them become more competitive. On the other hand, higher compensation costs (up 5.0 percent) pushed unit labor costs higher (up 1.7 percent) for nondurable goods manufacturers in the revised data.

Looking at longer-term trends, we continue to see one of the reasons why manufacturing in the U.S. has become more attractive in recent years. Since the end of 2009, unit labor costs for manufacturers have fallen 3.6 percent, with durable goods unit labor costs off 13.1 percent over that time frame.

In the larger economy, nonfarm labor productivity declined 3.2 percent in the first quarter, following three consecutive quarters of decent growth. This was lower than the 1.7 percent decrease in the earlier estimate, with a downward revision in output (down from a growth rate of 0.3 percent to a loss of 1.1 percent) largely to blame. Therefore, unit labor costs were up 5.7 percent for the quarter. In 2013, nonfarm labor productivity rose 0.5 percent, with output up 2.2 percent and unit labor costs up 1.1 percent.

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

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Manufacturing Production Rebounded in February, Offsetting Weather-Related Softness in January

The Federal Reserve Board said that manufacturing activity rebounded in February following weather-related weaknesses in January. Manufacturing production increased 0.8 percent in February, nearly offsetting the revised 0.9 percent decline from the month before. The year-over-year pace of manufacturing output rose from 1.3 percent to 1.5 percent. These very modest rates of growth reflect significant deceleration from the 3.8 percent pace seen in October. In terms of annual rates for the specific sectors, durable goods manufacturers had larger increases in production than their nondurable goods counterparts (up 2.7 percent to 0.5 percent, respectively).

Capacity utilization also mostly recovered in February, up from 75.9 percent to 76.4 percent. This was still below the 76.7 percent utilization rates observed in both November and December.

In February, durable and nondurable goods production rose 0.9 percent and 0.7 percent, respectively. The largest gains were seen in the motor vehicles and parts (up 5.7 percent), computer and electronic products (up 5.2 percent), plastics and rubber products (up 4.3 percent), machinery (up 3.0 percent), and furniture and related products (up 3.0 percent) sectors.

Nonetheless, there were 7 of the 19 major manufacturing sectors with continued declines in output, suggesting that the rebound could still be broader. Areas with decreased production included textile and product mills (down 2.7 percent), paper (down 2.0 percent), electrical equipment and appliances (down 1.4 percent), petroleum and coal products (down 1.3 percent), and wood products (down 1.2 percent).

Meanwhile, overall industrial production recovered in February, as well, up 0.6 percent following the 0.2 percent decline in January. In addition to the bounce-back in manufacturing, mining output rose 0.3 percent. Utility production declined 0.2 percent, but that followed a 3.8 percent jump in January as more Americans were using more energy to heat their homes. Industrial production increased 2.8 percent over the past 12 months, with capacity utilization rising 1.9 percent to 78.8 percent in February.

In summary, much has been made about the negative impact of weather on manufacturing output in the past couple months, and the February data suggest that production has picked back up as the temperatures warmed up, as we expected. (Ironically, I am writing this during yet another snow day here in Washington.)

Manufacturing production rose an annualized 3.0 percent in the second half of 2013, with durable goods output up 4.3 percent at the annual rate, providing a lot of momentum for 2014. Moreover, manufacturers are mostly upbeat about stronger demand and production over the coming months, a finding that we observed in the recent NAM/IndustryWeek survey. Still, the modest growth rates of the past couple months remind us that economic growth can be quite fragile, necessitating the need for pro-growth policies to keep the momentum going.

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

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Labor Productivity Estimates for the Fourth Quarter Were Revised Lower

The Bureau of Labor Statistics lowered its estimates of productivity growth down from 2.0 percent as originally stated to 1.3 percent. Output growth was also reduced for the quarter, down from 6.6 percent to 5.0 percent. Still, that figure suggests relatively strong growth overall, consistent with the bounce we saw in the second half of 2013. Unit labor costs edged slightly lower, off 0.1 percent in the fourth quarter.

Nondurable goods manufacturing was weaker than originally reported, with output up 2.4 percent instead of 4.1 percent. Labor productivity for nondurable goods decreased by 0.1 percent, with unit labor costs up 0.3 percent. On a year-over-year basis, productivity rose 1.0 percent, output increased 1.2 percent, and unit labor costs fell 0.2 percent.

In the durable goods sector, the news was quite positive, even with the latest revisions. Labor productivity increased a modest 3.0 percent on a huge jump in output of 7.5 percent. Unit labor costs declined 1.3 percent, helping to keep the sector more competitive globally. Speaking to the strengths of durables over the past year, output rose 4.6 percent over the past 12 months.

In the larger economy, labor productivity in the nonfarm business sector was also revised lower, down from the original estimate of 3.2 percent to 1.8 percent. Output increased 3.4 percent, and unit labor costs were marginally down by 0.1 percent.

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

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Manufacturing Labor Productivity Improved in the Fourth Quarter on Stronger Output Growth

The Bureau of Labor Statistics said that labor productivity in the manufacturing sector improved in the fourth quarter on stronger output growth. Manufacturing labor productivity rose 2.0 percent in the fourth quarter, rebounding from the decline of 0.1 percent in the third quarter.

For the year as a whole, labor productivity for the sector was up a modest 2.0 percent, a slight gain over the 1.8 percent increase observed in 2012. The annual growth in 2013 stemmed largely from durable goods firms, which outpaced the labor productivity growth of nondurable goods businesses by 3.1 percent to 1.4 percent, respectively.

Labor productivity for durable goods was up a healthy 3.4 percent, buoyed by an 8.8 percent jump in output growth. This was a nice improvement from the 1.0 percent increase in labor productivity and 3.2 percent growth in output for the durable goods sector seen in the third quarter. Unit labor costs declined in both quarters, however, down 0.9 percent and 2.7 percent, respectively. We have seen durable goods unit labor costs decline 11.6 percent since the end of 2009, helping to keep these manufacturers more competitive globally.

Nondurable goods manufacturers also had productivity improvements in the fourth quarter. Labor productivity for nondurable goods firms rose 1.0 percent in the fourth quarter, up from the 0.8 percent decline observed in the third quarter. This corresponded with a recovery in output growth from a decrease of 0.8 percent in the third quarter to a gain of 4.1 percent in the fourth quarter. Nonetheless, unit labor costs were higher in both quarters, up 4.0 percent and 0.7 percent, respectively. In the fourth quarter, this was due to output growth outpacing the increase in the average number of hours worked in the nondurable goods sector.

In the larger economy, nonfarm labor productivity grew 3.2 percent in the fourth quarter, expanding upon the 3.6 percent growth notched in the third quarter. For the year as a whole, however, nonfarm productivity was a more disappointing 0.6 percent, averaging just 0.9 percent over the past three years. In the fourth quarter, output growth picked up strongly, increasing by 4.9 percent. Unit labor costs were down 1.6 percent for the quarter, but were up 1.0 percent for 2013.

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

productivity

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Manufacturing Labor Productivity Revised Lower in Second Quarter to 1.9 Percent

The Bureau of Labor Statistics revised its labor productivity data for the manufacturing sector in the second quarter, down from its original estimate of 2.7 percent to 1.9 percent. In the original release, manufacturing output rose 0.1 percent. Instead, production was off by 0.6 percent, pushing the overall productivity numbers down. With real hourly compensation up 4.2 percent in the sector, unit labor costs for manufacturers increased 2.3 percent in the second quarter, up from the 1.4 percent gain in the earlier data. Ideally, we would like to see negative unit labor costs, as this helps businesses become more competitive globally.

The downward revisions to productivity extended to both durable and nondurable goods sectors, with the former faring better than the latter. Labor productivity in the durable goods sector was lowered from 4.5 percent to 3.5 percent, with output up 0.5 percent and unit labor costs increasing 1.3 percent. This represented a sizable deceleration in output from the first quarter, but only a marginal decline in labor productivity.

For nondurable goods businesses, output fell 1.9 percent and productivity was up just 0.2 percent. Each was lower than the original estimate of down 1.5 percent and up 0.7 percent, respectively.  Unit labor costs for nondurable goods manufacturers rose 3.2 percent. These were significant pullbacks from the growth experienced in the first quarter.

In the larger economy, the revisions were on the favorable side. Nonfarm labor productivity grew 2.3 percent, much higher than the original estimate of 0.9 percent. That was the fastest pace since the third quarter of 2012. Output increased 3.7 percent, up from the 2.6 percent figure reported before. Real compensation in the nonfarm sector was up 2.3 percent, and unit labor costs were unchanged. Unit labor costs had been said to have risen 1.4 percent earlier, suggesting improvement in this variable.

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

productivity

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Nonfarm Labor Productivity Revised Sharply Higher, with Manufacturing Lower

The Bureau of Labor Statistics reported that nonfarm productivity was up 2.9 percent in the third quarter. This is up sharply from the 1.9 percent estimate originally provided and was largely a factor of higher-than-originally-stated output. Indeed, real GDP was also revised higher last week and is now estimated to have gone up by 2.7 percent. The larger labor productivity numbers helped to push unit labor costs for the nonfarm sector down 1.9 percent in the third quarter for the second quarter in a row, helping to improve businesses’ costs and competitiveness.

For manufacturers, the opposite is true. The previous estimate said that manufacturing labor productivity fell by 0.4 percent in the third quarter; this revision pushes that to a decrease of 0.7 percent. Output also dropped 0.7 percent, and the number of hours was unchanged. The net result was that unit labor costs for the sector declined by 3.2 percent. Therefore, manufacturers have seen substantial unit labor cost increases so far in 2012, reversing the more positive news of 2010 and 2011 when productivity was helping to make the sector more competitive globally. Much of this shift can be explained by decelerating, or more recently falling, output.

It might also be instructive to separate out this discussion between durable and nondurable goods manufacturing. In the third quarter, nondurables fared better than durables. Output for nondurables rose 0.7 percent, which contrasts with a 1.9 percent drop for durables. This largely accounts for the difference in labor productivity between the two, with durable goods output per hour for all persons down 1.6 percent and nondurable productivity up 0.7 percent. With that said, unit labor costs for each were both higher, up 3.7 percent and 3.0 percent, respectively.

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

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Manufacturing Output Expands in New York and Philadelphia

Two East Coast manufacturing surveys released this morning found that manufacturing output has expanded in the past month. This is notable because both of them have witnessed weaknesses in the summer and fall months, and recent improvements are highly welcome.

First, the Empire State Manufacturing Survey from the Federal Reserve Bank of New York observed a much-improved environment in the region. Its general business conditions index increased from 0.6 in November to 9.5 in December. This is two straight months of growth, following five consecutive months of contraction. In essence, manufacturing activity has gone from neutral last month to stronger growth this month.

Most of the key variables experienced growth from November, particularly for new orders, shipments and employment. Inventories, unfilled orders and the average employee workweek contracted. Raw material prices went up again, with the index for prices paid growing from 18.3 last month to 24.4 in December.

Manufacturers in the region are overwhelmingly positive about the new year. The forward-looking indicators were strong across-the-board, especially for new orders and shipments where over 60 percent of respondents said that they anticipated increases. (Given recent weaknesses in manufacturing activity, it is perhaps not surprising that the intensity of those suggesting increases in production should be so strong.) Other variables were also expected to grow over the coming months, including inventories, employment and capital expenditures.

(continue reading…)

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U.S. Manufacturing Remains World’s Largest

U.S. manufacturing remains the world’s largest manufacturer, despite an inaccurate report in today’s Financial Times that China has passed the United States. American manufacturing, in fact, is so large that if it were a self-standing economy, it would be the eighth largest in the world.

There are a number of errors in the data provided to the Financial Times by a private sector consultant. First, the report did not measure the physical quantity or volume of manufacturing, but rather measured current dollar output which is impractical due to price changes and exchange rate changes. Real Gross Domestic Product (GDP), and its manufacturing component, Real Manufacturing Value-Added, are the correct ways to measure economic output, because they are adjusted to remove the effect of price and exchange rate changes and measure real output.

The United Nations Statistics Division compiles global data on manufacturing value-added, and its most recent data shows the United States continues to lead, with close to 21 percent of all global manufacturing output in terms of constant dollars (real manufacturing value-added in 2009). China is the second largest, with about 15 percent of global manufacturing. No official data are available for 2010 yet, but given the gap between the top two manufacturers, China will not have surpassed the United States in 2010.

The second problem is that the consultant did not rely on official data in making its estimates. Rather than use the United Nations official data which is agreed upon by most economists as reliable, the consultant appears to have made its own assumptions. Using the consultant’s growth assumptions for China and the United States in 2010, and applying them to the official 2009 data shows that even in current dollars the United States remained the worlds’ largest manufacturer in 2010.

The U.S. Department of Commerce, which compiles the manufacturing value-added data, says that preliminary 2010 estimates will not be available until next month. In an effort to clarify the erroneous information provided to the Financial Times, the National Association of Manufacturers shared the data that shows the U.S. remains the world’s largest manufacturer.

Frank Vargo is the NAM vice president of international economic affairs.

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