Tag: Midwest Manufacturing Index

Midwest Manufacturing Activity Continues to Improve

The Chicago Federal Reserve Bank said that manufacturing activity in its District continued to improve, expanding for the third straight month. The Midwest Manufacturing Index (MMI) increased from 96.7 in August to 97.0 in September to 97.4 in October. The September and October data were new in this report, which was delayed one month due to the government shutdown. After a brief pullback in July, the MMI has risen 2.1 percent over the past three months.

Taking a longer view, manufacturing output in the Midwest has risen 5.7 percent year-over-year. This suggests that production growth in the Chicago Fed region has increased much stronger that what we see nationally, with manufacturing production up 3.3 percent over the past 12 months in Federal Reserve data.

The healthier output growth stems largely from strength in the auto sector, which has expanded by a whopping 8.7 percent at the annual rate. After slowing down in July due to retooling for the new model year, production has mostly expanded since then. There was a slight decline in October (down 0.2 percent), but output has increased 1.6 percent over the past four months.  (I went back to June for this comparison to take the large swings in July and August out of the calculation.)

Meanwhile, other components of the manufacturing sector has also grown strongly, with steel output up 5.9 percent and machinery production up 4.5 percent over the past 12 months. The “resource” sector was up 1.7 percent year-over-year. Components of the resource sector, according to the Chicago Fed, include food, wood products, paper, chemicals, and nonmetallic mineral products. Over the past three months, the steel and machinery sectors’ production rose 2.2 percent and 2.3 percent, respectively. However, resource sector output declined 1.2 percent.

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

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Chicago Fed: Manufacturing Activity Rebounded in August from Slower Conditions in July

The Chicago Federal Reserve Bank said that manufacturing activity rebounded in August, after slowing in July. The Midwest Manufacturing Index (MMI) increased 1.5 percent from 95.4 in July in 96.7 in August. This index is heavily influenced by the auto sector, and as we seen in recent national jobs and production data, motor vehicle production picked up in August after retooling in July for the new model year. Indeed, auto output in the MMI declined 2.8 percent in July, but was up 4.1 percent in August. On a year-over-year basis, motor vehicle production in the district has risen 8.4 percent.

The recovery in the auto sector has helped to make the Chicago Fed district one of the stronger regions in the country. Over the past 12 months, the MMI has increased 4.0 percent, better than the 2.8 percent pace observed nationally for the manufacturing sector (NAICS). Moreover, the MMI has grown 14.0 percent and 21.8 percent over the past 2 and 3 years, respectively. This compares to 6.6 percent and 9.4 percent growth over the same time period for U.S. manufacturing production.

Outside of motor vehicles, output in the machinery (up 0.8 percent) and resource (up 0.4 percent) sectors were both higher. Components of the resource sector, according to the Chicago Fed, include food, wood products, paper, chemicals, and nonmetallic mineral products. Machinery recovered from softness in July; whereas, resource sector activity grew at the same pace, which was accelerated from June’s 0.1 percent growth rate. The two sectors have grown a modest 1.5 percent and 1.9 percent, respectively, over the past year.

The steel sector was the lone holdout in the MMI for August, down 0.1 percent. Yet, it had been the bright spot in July, having increased 1.3 percent while the other three components were down. Year-over-year growth for steel was 2.2 percent, with metals benefitting from higher auto and machinery sector activity.

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

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Monday Economic Report – September 3, 2013

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

As we move into September, manufacturers remain mostly upbeat about increased demand and production for the rest of the year, even as they weigh possible downward risks that might curtail such positive sentiments. With that in mind, the fact that real GDP was revised higher from the original estimate of 1.7 percent to 2.5 percent was welcome news. Much of that improvement was due to better export figures, as we saw in June’s trade data. With export growth frustratingly slow so far in 2013, this was an encouraging sign for the third quarter. We will get new trade numbers for July on Wednesday.

Even with the upward revision, the U.S. economy grew at a rather paltry 1.8 percent in the first half of the year. Assuming growth in the second half picks up, as most manufacturers predict, real GDP growth in 2013 will still rise only modestly this year, probably slightly greater than 2.0 percent. Business leaders yearn for policies like those laid out in the NAM’s Growth Agenda that will boost growth beyond the moderate pace that we have become accustomed to over the past few years.

From a manufacturing perspective, the most recent reports have been mixed. New durable goods orders plunged in July. This was largely on reduced aircraft orders, but there were broader weaknesses as well. Nonetheless, new durable goods sales have risen 3.4 percent year-to-date, hopefully suggesting that July’s decline was just a blip. Likewise, the Midwest Manufacturing Index (MMI) was lower in July, mostly on decreased output in the automotive and machinery sectors. However, this was not the only reading on Midwestern production. The Chicago Business Barometer edged somewhat higher in its August Purchasing Managers’ Index, giving some hope that the MMI softness might have been short-lived. Meanwhile, manufacturers in the Dallas and Richmond Federal Reserve regions reported expanding activity and a cautiously optimistic outlook ahead, even as the Dallas Federal Reserve found some easing in sentiment for the month.

August’s consumer confidence numbers were also mixed, with the Conference Board’s index moving higher and the University of Michigan’s analysis showing a slight decline. Nonetheless, both measures show Americans are more optimistic than earlier in the year and near their pre-recessionary highs. The University of Michigan’s decrease in consumer sentiment was more than likely due to pocketbook issues, such as higher gasoline prices and increased borrowing costs. At the same time, they might also be reflective of slower income growth. The Bureau of Economic Analysis reported that wages and salaries dipped in July, with personal income up just 0.1 percent, even as year-to-date growth in compensation continues to be higher.

This week, in addition to the latest international trade figures, the other highlights will be the Institute for Supply Management’s (ISM) manufacturing activity measure and the most recent jobs data. The ISM report is expected to show modest gains in new orders and activity, building on July’s strong figures. In terms of employment, nonfarm payrolls are forecasted to grow around 170,000, according to consensus estimates, with slow manufacturing growth. Outside of these measures, there will be new data on construction spending, labor productivity and new factory orders.

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

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Midwest Manufacturing Index Down Slightly in July

The Chicago Federal Reserve Bank said that manufacturing activity in its district declined 0.1 percent in July. The Midwest Manufacturing Index decreased from a revised 95.9 in June to 95.8 in July. Overall, these data suggest that output in the Midwest peaked in March and has declined 0.5 percent since then. This suggests continued weaknesses in the manufacturing sector – a take that is somewhat different from some of the other regional surveys showing a rebound in July.

Taking the longer view, manufacturing output in the Midwest has risen 1.6 percent year-over-year. As we see in the national data, the sector has grown over the past 12 months, but not at a robust pace by any means.

The Midwest Manufacturing Index is heavily influenced by activity in the automotive sector. In July, output declined 0.4 percent, helping to drag the overall index lower. In general, this was a pause in an otherwise strong rally in motor vehicle output growth. Year-to-date, automotive production in the Chicago Fed’s district has increased 0.6 percent, with growth of 1.9 percent and 29.4 percent over the past year and two years, respectively.

Steel production had the strongest gains in output in July, up 1.5 percent, a figure not much different from its year-over-year pace of 1.6 percent. Machinery output was off 0.3 percent for the month, but it has risen 0.8 percent year-to-date. Meanwhile, the “resource” sector’s output was unchanged in July and up 1.3 percent over the past 12 months. Components of the resources sector, according to the Chicago Fed, include food, wood products, paper, chemicals, and nonmetallic mineral products.

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

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Midwest Manufacturing Output Rebounded in June

The Chicago Federal Reserve Bank said that manufacturing activity in the Midwest picked up in June. The Midwest Manufacturing Index increased 0.4 percent in June, reversing declines in both April and May. In general, growth in ouptut in the Fed district has been sluggish so far in 2013, with the index up 0.8 percent since December. On a year-over-year basis, the data have been better, up 3.5 percent.

That annual pace was nearly double the national rate, with industrial production increasing 1.8 percent for manufacturers country-wide. This has largely been due to gains in the auto sector, which grew a robust 7.3 percent over the past 12 months. Motor production in June was up a more modest 0.1 percent in June, however. The other driver of growth in the district was the resource sector, which had output growth of 3.3 percent year-over-year. The Chicago Fed includes the following in the resource sector: food, wood products, paper, chemicals, and nonmetallic mineral products.

The Midwest Manufacturing Index noted higher levels of activity across-the-board. In addition to autos, there was increased activity in the machinery (up 0.4 percent),  resource (0.4 percent), and steel (up 0.3 percent). Over the past 12 months, the steel sector has grown 1.4 percent; whereas, the machinery segment has struggled, with 1.1 percent less output since June 2012.

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

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Monday Economic Report – May 6, 2013

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

Looking at last week’s reports, there appears to be a split between the economic progress of the larger economy and what we continue to observe in the manufacturing sector. That is not to suggest that the U.S. economy is growing robustly—because it isn’t. Nonetheless, some of the data show signs of upward movement. The Bureau of Labor Statistics reported that 165,000 new nonfarm payroll workers were added in April, with healthy upward revisions for February and March. As a result, the economy created almost 200,000 workers in the first four months of 2013, and the unemployment rate fell to 7.5 percent, its lowest level in more than four years. At the same time, the participation rate remains low, and the “real” unemployment rate is still elevated at 13.9 percent, suggesting challenges continue on the labor front even with the recent progress.

One of those challenges can be seen in the manufacturing sector, with its employment levels unchanged in April and lower on a year-over-year basis. Several indicators show softness in activity nationally for manufacturers, with sales, production and employment growing at a slower pace. The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) dropped from 51.3 in March to 50.7 in April largely on flat job growth, and factory orders declined 3.1 percent in the first quarter of 2013. Manufacturing construction spending was also lower. Regionally, several surveys tend to indicate an easing in activity, with modest growth at best, in manufacturing. The one exception of note was the Chicago Federal Reserve Bank’s Midwest Manufacturing Index, which noted an increase in production mainly due to higher output in the motor vehicle sector. (continue reading…)

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ISM-Chicago Data Suggest Contracting Activity in April

The Chicago Business Barometer from ISM-Chicago and Deutsche Börse declined from 52.4 in March to 49.0 in April. This is the lowest value for the index since 2009, with the report indicating that manufacturing activity in the region contracted for the first time in 3½ years. As such, it stands in contrast to the Midwest Manufacturing Index from the Chicago Federal Reserve Bank, which was released yesterday and found production levels moving higher in March. It is consistent, though, with several of the other regional manufacturing surveys of late which have reported slowing in the sector.

For the ISM-Chicago report, production helped to drive the larger index lower. To illustrate the slowing of activity in this data, the index for production has fallen from 60.9 in January to 51.8 in March to 49.9 in April. The April reading indicated a slight contraction for the month, with manufacturing activity essentially stalled. Employment also declined, with its index dropping from 55.1 to 48.7. This was the first pullback in hiring since December.

On the positive side, new orders edged marginally higher for the month, up from 53.0 in March to 53.2 in April. This figure was still well-below the 60.2 reading of February. The good news is that inventory and order backlog levels continue to diminish. This should mean that activity should pick up on stronger sales data, with stockpiles so low.

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

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Midwest Manufacturing Activity Mostly Mixed in January, Still Up 0.1 Percent

The Chicago Federal Reserve Bank said that its Midwest Manufacturing Index edged slightly higher in January. The index was up 0.1 percent in January to 97.0 from 96.8 in December. This was the third consecutive monthly increase (albeit a small one), and it continues a longer-term upward trend. Production in the Midwest has risen 6.4 percent over the past 12 months and 17.9 percent over the past 24 months, helping the sector recovery from significant declines in the Great Recession.

The rebound in the auto sector was largely responsible for much of these increases. Motor vehicle production rose 0.7 percent in January and 15.2 percent year-over-year. The Midwest Manufacturing Index tends to rise and fall largely on how the auto sector is performing, and strength in this sector has helped the Midwest outperform many of the other regions. The other sector to do well in January was machinery, which saw production increase 0.4 percent or 2.8 percent year-over-year.

Of course, it was not all good news. There were weaknesses in the resource and steel sectors in January, down 0.3 percent and 0.5 percent, respectively. These declines counteracted the strengths in the auto and machinery sectors. With that said, year-over-year gains in these two areas were 1.5 percent and 3.1 percent. Recent improvements in the U.S. economy and increases in overall production should allow these two sectors to experience growth in the coming months, however.

Chad Moutray is chief economist, National Association of Manufacturers.

 

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Midwest Manufacturing Activity Was Higher in December

Manufacturing activity in the Midwest picked up in December, according to the Chicago Federal Reserve Bank. The Midwest Manufacturing Index rose 0.7 percent from 94.1 in November to 94.7 in December. This was the second consecutive month of improving numbers.

The largest gain in December was seen in the auto sector, up 1.5 percent. This builds on the 4.0 percent gain in November and is a sign that the motor vehicle segment is recovering from some weaker months in the fall. Steel production was also higher, up 0.7 percent, but machinery and resource activity was down 0.3 percent and 0.1 percent, respectively.

For the year of 2012, the Midwest District experienced a 6.2 percent increase in manufacturing production, making it one of the brighter spots in the country for activity last year. The bulk of that stemmed from higher auto production, up 16.8 percent. Meanwhile, steel, machinery, and resource manufacturers experienced 3.3 percent, 1.0 percent, and 0.4 percent gains in activity, respectively, in 2012.

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

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