Tag: new orders

Manufacturers in Texas Note Accelerated Activity in July

The Federal Reserve Bank of Dallas said that manufacturing activity accelerated in July, continuing to rebound from softer levels earlier in the year. The composite index of general business activity rose from 11.4 in June to 12.7 in July. It was the 14th consecutive month of expanding levels of activity; however, manufacturers reported a near-stagnant pace in February. In July, the underlying data were mostly higher across-the-board, including the pace of growth for new orders (up from 6.5 to 13.0), production (up from 15.5 to 19.1), shipments (up from 10.3 to 22.8), capacity utilization (up from 9.2 to 18.0) and capital expenditures (up from 12.7 to 13.3).

With that said, employment growth (down from 13.1 to 11.4) eased slightly, one of the few areas that decelerated in the month. Still, hiring has generally improved from where it was two months ago, with the index up from 2.9 in May. Moreover, one-quarter of respondents to the Dallas Fed survey said that they had added workers in July, with just 13.6 percent suggesting that employment was declining for their company. In addition, the average number of hours worked (up from 4.7 to 6.3) increased somewhat.

Along those lines, a fabricated metal manufacturer noted difficulties in attracting and retaining workers in the sample comments. They wrote, “Skilled employee turnover is getting out of control. There are too many employers chasing too few skilled workers.” Other commenters spoke about the pickup in demand seen in July, with one computer and electronics product respondent adding, “The second quarter was a sold quarter from start to finish….”

Looking ahead six months, Texas manufacturers remain positive about future levels of activity. At least 45 percent of those taking the survey expect sales, production, and shipments to increase over the coming months, with just single-digit percentages anticipating declines. Beyond that, 31.5 percent plan to bring on new workers, and one-quarter are expecting to increase their capital expenditures. The one downside would be the forecast of higher raw material costs moving forward, with a pickup in pricing pressures. In all, 40.7 percent predict increased producer prices in the coming months, with just 6.5 percent expecting declines.

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

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Kansas City Fed: Manufacturing Activity Expanded for the Seventh Straight Month in July

The Kansas City Federal Reserve Bank said that manufacturing activity has expanded every month so far in 2014, picking up slightly in July from June. The composite index of general business conditions rose from 6 in June to 9 in July. The pace of growth accelerated in many of the key indicators, including new orders (up from 8 to 12), production (up from 2 to 11), shipments (up from 2 to 14) and employment (up from 1 to 8). One-third of survey respondents said that their production had increased in the month.

There were two negatives in the report, as well. The average workweek (down from 7 to -3) shifted into its first contraction in six months. The percentage of those taking the survey who noted a reduced workweek increased from 12 percent in June to 17 percent in July, enough to tip the diffusion index. In addition, new export orders (up from -11 to -6) continued to fall, albeit at a slower pace of decline for the month. This measure has been in contraction territory in 8 of the past 12 months, indicating weakness on the trade front in the Kansas City Fed’s district.

Nonetheless, there continue to be encouraging signs for the months ahead. The forward-looking composite index increased from 12 to 15, with relatively strong growth anticipated over the next six months. Manufacturers in the region expect higher new orders (up from 14 to 24), production (up from 17 to 23), shipments (up from 20 to 28), employment (up from 14 to 23) and capital expenditures (up from 23 to 25) at rather healthy rates of growth. In fact, over 40 percent predict increased sales, output and shipments, with more than one-third seeing additional hiring and capital spending. Yet, the sample comments also suggest frustrations with attracting qualified workers. Exports are predicted to grow just modestly (unchanged at 6).

Respondents expect pricing pressures to remain elevated, with nearly half of those taking the survey saying that raw material prices should increase over the next six months. Still, 24 percent felt that input costs for them might fall, and the diffusion index for this measure (down from 49 to 46) eased slightly in July.

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

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Continued Progress in China and the U.S., with Europe and Japan Growing More Modestly

The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) expanded for the second straight month in July, rebounding from softness from January through May. The headline index rose from 50.7 in June to 52.0 in July, its highest level since March 2011. The underlying data were mostly higher, including new orders (up from 51.8 to 53.7), output (up from 51.8 to 52.8) and exports (up from 50.6 to 52.7). The sales pace was the fastest since January 2011, and each of these measures are a sign that recent stimulative actions taken by the Chinese government have had a positive impact. Some downsides in the PMI survey contracting hiring rates for the 16th consecutive month (up from 48.7 to 49.5) and slightly accelerated raw material prices (up from 50.8 to 52.9).

Meanwhile, Japanese manufacturing activity also expanded for the second straight month, but it eased slightly in July. The Markit/JMMA Flash Japan Manufacturing PMI declined from 51.5 to 50.8. The recent uptick in activity has materialized as the Japanese economy has recovered from an increased in taxes that went into effect on April 1st. Still, manufacturers in the country cannot cheer yet, as output growth came to a halt in July (down from 51.8 to 50.0, or neutral). Other indicators were mixed. Export sales (up from 49.0 to 51.6) and employment (up from 49.8 to 50.8) both shifted to positive growth, but the pace of new orders decelerated somewhat (down from 52.0 to 51.1).

In other news, the Markit Flash Eurozone Manufacturing PMI edged marginally higher, up from 51.8 to 51.9. The Flash Eurozone PMI Composite PMI was up more strongly, increasing from 52.8 to 54.0, suggesting healthier growth in the service sector. For manufacturers, the data suggest slightly faster growth in production (up from 52.8 to 53.0) and exports (up from 52.4 to 52.7), but the pace of growth for new orders (51.9) and employment (50.3) were unchanged.

Overall, these figures provide a limited degree of encouragement for the manufacturing sector in Europe, which has worried of late about slow economic and income growth. It is also still clear that the data vary on country-by-country basis, with German manufacturing activity (up from 52.0 to 52.9) accelerating in July but with French manufacturers noting yet another deterioration in sales and output. Indeed, the French economy remains in a rut, with manufacturing activity positive in just three months since January 2013.

Closer to home, the Markit Flash U.S. Manufacturing PMI decreased from 57.3 to 56.3. Despite the slight easing in July, manufacturing activity continues to grow at relatively decent rates. Through the first seven months of 2014, the top-line index has averaged 55.9, stronger than the 53.5 average noted for 2013 as a whole. The July data show both new orders (down from 61.7 to 59.8) and output (down from 61.0 to 60.4) growing at a healthy paces, albeit with some deceleration for the month. Yet, hiring growth remains more modest (down from 53.8 to 52.1) and export sales (down from 50.9 to 50.6) were just barely growing, suggesting that there remains room for improvement.

Flash data give us an advance estimate of manufacturing activity incorporating “approximately 85% of the usual monthly survey replies,” with the final PMI data for the month released on August 1.

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

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Richmond Fed: Manufacturing Activity Expanding at a Modest Pace

The Richmond Federal Reserve Bank said that manufacturing activity grew at a modest pace, expanding for the fourth straight month. The composite index of general business conditions edged slightly higher, up from 4 in June to 7 in July. Note that historical data in the Richmond Fed survey were revised in this edition to reflect new seasonal adjustments.

Despite the improved top-line figure, the underlying data were largely mixed. The biggest positive was hiring, with the employment index up from 4 to 13. This was the fastest pace of hiring growth since December, which was encouraging. Wage (up from 12 to 16) and shipments (up from 2 to 3) were also higher. Yet, new orders (5) expanded at the same pace, and both capacity utilization (down from 7 to 4) and the average workweek (down from 5 to 3) decelerated somewhat for the month.

Still, manufacturers in the Richmond Fed’s district were mostly upbeat about the next six months, with forward-looking measures increasing in July for many indicators. For instance, new orders (up from 27 to 34), shipments (up from 24 to 36), capacity utilization (up from 18 to 29), employment (up from 12 to 19) and capital expenditures (up from 18 to 19) were all higher, with each suggesting relatively healthy paces of growth.

Inflationary pressures have picked up a bit for the month, but remain mostly in-check. Manufacturers in the region said that prices paid for raw materials grew 1.99 percent at the annual rate in July, up from 1.47 percent in June. Looking ahead six months, respondents expect input costs to increase an annualized 1.89 percent, up only marginally from 1.84 percent the month before.

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

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Empire State Survey Shows Manufacturing Growth at a Four-Year High in July

The Empire State Manufacturing Survey from the New York Federal Reserve Bank increased to its highest level in July since April 2010. The composite index of general business conditions rose from 19.3 in June to 25.6 in July, suggesting that manufacturing activity expanded strongly in the month. The jump in the headline figure was due largely to a drop in the percentage of respondents saying that conditions were worse, down from 21.1 percent in June to 15.0 percent in July. In contrast, 40.6 percent of manufacturers taking the survey said that they felt business was improving, up just slightly from the 40.4 percent who said the same thing the month before.

The underlying data were mostly positive, particularly for shipments (up from 14.2 to 23.6) and employment (up from 10.8 to 17.1). New orders also edged somewhat higher, up from 18.4 to 18.8, mostly from a drop in those saying that sales were lower. Yet, the data also had a couple weaknesses, with the average workweek (down from 9.7 to 2.3) easing a bit and pricing pressures (up from 17.2 to 25.0) picking up.

Looking ahead six months, manufacturers in the New York Fed district continued to be mostly optimistic, albeit with less enthusiasm than the month before. The forward-looking composite index decreased from 39.8 to 28.5, but the data still suggest relatively healthy gains moving forward. Growth rates were slower for a number of indicators, including new orders (down from 44.5 to 25.6), shipments (down from 45.2 to 24.6), hiring (down from 20.4 to 17.1) and capital spending (down from 11.8 to 9.1).

In all, 38.2 percent of respondents anticipate sales to be higher six months from now, with 49.2 percent expanding no changes. Other highlights include a slight increase in technology spending plans (up from 3.2 to 10.2), and reduced levels for inventories (down from 6.5 to -4.6) and the average workweek (down from zero to -4.6).

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

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Kansas City Fed: Manufacturing Activity Expanded at a Slower Rate in June

The Kansas City Federal Reserve Bank said that manufacturing activity expanded at a slower rate in June; nonetheless, growth was positive for the sixth straight month. The composite index of general business activity fell from 10 in May to 6 in June. Several indicators eased for the month, including production (down from 14 to 2), shipments (down from 5 to 2), new orders (down from 11 to 8) and the average workweek (down from 14 to 7). To illustrate this, 34 percent of respondents said that their production had increased In June, down from 40 percent in May.

The largest negative in the report was exports (down from 6 to -11), with 16 percent of those taking the survey suggesting that their international sales had fallen in June. In addition, hiring (down from 10 to 1) slowed to a crawl, with 23 percent suggesting that they had added employees but 17 percent noting declines.

Still, there continue to be some encouraging signs for the months ahead, albeit with somewhat weaker sentiment than earlier data. The forward-looking composite index has edged down from 21 in April to 13 in May to 12 in June. Yet, at least 35 percent of survey respondents anticipate sales, shipments, and output to be higher six months from now, and 28 percent plan to add workers. Capital spending (up from 19 to 23) was expected to pick up slightly. Pricing pressures declined a bit for the month, but remain elevated with 48 percent of survey-takers anticipating increased raw material costs ahead.

Several of the sample comments noted workforce challenges. As one manufacturer put it, “It is not so much a question of short supply of workers, but rather a question of workers who are reliable and possess a strong work ethic.” Others noted the limited availability of possible employees with the right skills in their community and challenges with competition for workers in terms of compensation.

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

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Philly Fed: Manufacturing Activity Expanded Strongly in June

The Federal Reserve Bank of Philadelphia said that manufacturing activity expanded strongly in June, extending the spring rebound in the region. The Business Outlook Survey’s composite index of general business activity increased from 15.4 in May to 17.8 in June, averaging 16.6 over the past three months. The underlying numbers were mostly positive. There were faster rates of growth for new orders (up from 10.5 to 16.8), shipments (up from 14.2 to 15.5), hiring (up from 7.8 to 11.9), and the average workweek (up from 2.9 to 7.3). Over 39 percent of respondents said that new orders were higher in the month, up from 34.8 percent in the prior survey.

Pricing pressures remain elevated, with raw material costs continuing to edge higher. The index for prices paid rose from 23.0 to 35.0, with 36.2 percent of those taking the survey suggesting that input costs had increased in June. Just over 60 percent said that raw material prices were unchanged, with just 1.2 percent indicating a decline. Moving forward six months, 44.5 percent anticipate their costs to rise, with none expecting them to fall. For the most part, this mirrors the recent producer price index data which has shown core inflation picking up somewhat.

Looking toward the second half of 2014, manufacturers in the Philly Fed district were mostly upbeat. In a special question on production expectations, 73.9 percent of respondents said that they anticipate increased production in the coming months, with nearly 48 percent predicting output growth of more than 4 percent. This corresponds with 59.7 percent who predict increased new orders over the next 6 months.

Employment growth is also expected to increase, but with some mixed news overall. The good news is that 29.0 percent say that they plan to hire additional workers in a special question. Yet, that figure is slightly dwarfed by those who do not indent to hire but plan to increase output through productivity gains (27.5 percent) or more hours for existing staff (11.6 percent). This suggests that firms remain slightly hesitant about adding to their workforce, even as we have seen progress of late on the employment front.

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

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Empire State Survey: Stronger Growth in Manufacturing Sustained in June

The Empire State Manufacturing Survey from the New York Federal Reserve Bank continued to reflect strong growth in June. The composite index of general business conditions remained quite elevated, up from 19.0 in May to 19.3 in June, essentially sustaining the sharp increase seen the month before. In all, just over 40 percent of survey respondents said that business conditions were better in June, with 21.1 percent suggesting that they had worsened. Similar to last month, this was the fastest pace for the composite index since June 2010.

A nice jump in sales helped to push manufacturing sentiment higher for the month, with the index for new orders rising from 10.4 in May to 18.4 in June. The percentage of those taking the survey who reported increasing new orders rose from 31.9 percent to 40.7 percent. The length of the average workweek also widened (up from 2.2 to 9.7). Still, there was some easing in other components, including shipments (down from 17.4 to 14.2) and employment (down from 20.9 to 10.8). The latter suggests a slight deceleration in hiring, but still a decent pace.

Looking ahead six months, manufacturers in the New York Fed district continued to be mostly optimistic. While the forward-looking composite index eased slightly for the month (down from 44.0 to 39.8), this figure still indicates strong growth over the next six months, and other figures suggest accelerating levels of activity. For instance, the pace of new orders (up from 36.7 to 44.5), shipments (up from 33.8 to 45.2), all hiring (up from 17.6 to 20.4) are all expected to pick up in the coming months. Indeed, 55.4 percent anticipate increased new orders over the next six months, which is positive news.

On the down side, the average employee workweek is anticipated to be unchanged (up from -3.3 to zero) moving forward, and the pace of expected capital expenditures (down from 19.8 to 11.8) and technology spending (down from 4.4 to 3.2) both eased this month. Over one-quarter of respondents still plan to increase capital spending in the months ahead, but these figures suggest some cautiousness on the investment side, which we would like to see change.

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

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ISM: Revised Data Point to a Lift in Manufacturing Activity in May

The Institute for Supply Management’s (ISM) manufacturing purchasing managers’ index (PMI) was originally report to have moved lower in May. The headline figure was said to have declined from 54.9 in April to 53.2 in May, rebuffing other sentiment surveys showing a rebound. Yet, later in the day, ISM announced that it had erred in its seasonal adjustment calculation, with May’s PMI value rising to 55.4 instead. As such, manufacturing activity has steadily risen in each month since January’s weather-related softness, with the PMI averaging 53.7 year-to-date. Still, this contrasts with an average of 56.3 from July and December 2013, suggesting that we still do not have the robust growth that we might prefer.

The sample comments note increased demand and “steady” business. Data for new orders (up from 55.1 to 56.9) and production (up from 55.7 to 61.0) were both higher. The output index’s figure marked the first time since December that the production measure exceeded 60. (It had exceeded 60 for five straight months at the end of last year.) On the hiring front, employment growth (down from 54.7 to 52.8) eased somewhat.

The one issue that tends to dominate many of the responses is prices. In fact, the index for prices of raw materials increased from 56.5 in April to 60.0 in May, back to where it was in February. This measure of pricing pressure has averaged 59.2 so far in 2014, up from 53.8 for 2013 as a whole. This information is consistent with other data showing producer prices accelerating of late.

In short, while manufacturing activity remains a mostly positive one, with manufacturers cautiously optimistic in their outlook. Yet, no one can dispute that economic growth has started the year off slower than we would like.

Chad Moutray is the chief economist, National Association of Manufacturers. Note that this post was revised to reflect updated ISM data. 

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Kansas City Fed: Manufacturing Activity Accelerated in May

The Kansas City Federal Reserve Bank said that manufacturing activity accelerated in May, continuing stronger growth seen since March. The composite index of general business activity increased from 7 in April to 10 in May, matching its level from March. This suggests that the sector has mostly rebounded from challenges related to winter storms earlier in the year. Indeed, the production index has averaged 16 over the past three months (March to May), a nice pickup from the -6 average in the three months prior to that (December to February). A similar rebound was seen for new orders.

On the labor front, the rebound in demand and output has led to a renewed desire to add new workers (up from 3 to 10), with just over one-quarter of respondents saying that their increased their employment levels for the month. Similarly, the average workweek also widened (up from 6 to 14) and production picked up. Regarding workforce development, several of the sample comments discussed difficulties in attracting and retaining employees. They suggest some tightness in the labor markets for some fields and the need to spend more on training for existing and prospective workers.

If there were any weaknesses, it would be growth in export sales (down from 0 to -3), which have contracted in 7 of the past 12 months. Meanwhile, pricing pressures have risen, with the index for the cost of raw materials increasing from 16 in March to 21 in April to 28 in May. Looking ahead six months, 54 percent of those taking the survey anticipate input costs to rise, with 37 percent planning for them to remain the same.

Fortunately, manufacturers in the Kansas City Fed district remained mostly positive about the coming months, even if the overall forward-looking measure eased for the month (down from 21 to 13). Still, nearly half of the respondents expect new orders and shipments to increase over the next six months, with roughly one-third planning to hire more workers and invest in new capital equipment.

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

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