Tag: new orders

Philly Fed: Manufacturing Activity Eased Slightly, but Growth Remains Strong

The Federal Reserve Bank of Philadelphia said that manufacturing activity eased slightly, but growth remained strong in its district. The Manufacturing Business Outlook Survey’s composite index of general business activity declined from 28.0 in August to 22.5 in September. While the figure decreased somewhat, it is important to note that August’s reading was the fastest pace since March 2011, and a modest pullback should have been anticipated. Many of the key indicators continued to expand at healthy rates, keeping the underlying trends positive.

As evidence of this, the paces for new orders (up from 14.7 to 15.5), shipments (up from 16.5 to 21.6) and employment (up from 9.1 to 21.2) accelerated. The percentage of respondents saying that their sales had increased in the month rose from 32.3 percent in August to 37.6 percent in September. Roughly one-quarter of respondents noted additional hiring in both months, with the percentage citing declines in employment dropping from 15.6 percent to 4.5 percent. Therefore, fewer manufacturers were cutting workers in September, which was encouraging. Still, the average workweek (down from 13.3 to 4.4) narrowed a bit.

Manufacturers remained overwhelmingly upbeat in their outlook despite a decrease in the forward-looking composite measure (down from 66.4 to 56.0). In fact, 55.1 percent of respondents anticipate increased new orders in the next 6 months, with 58.8 percent seeing higher shipment levels. Regarding employment, 43.6 percent expect to add new workers in the coming months, with just 4.0 percent indicating possible declines. Capital spending (up from 17.5 to 23.7) was also expected to increase at decent rates. The one downside was pricing pressures for raw materials, with almost half of those taking the survey predicting higher input costs ahead.

As further evidence of this optimism, manufacturers responded to a special question about production in the third quarter. Nearly 59 percent of them said that output would increase for their company in the third quarter relative to the second quarter, with 28.7 percent stating declines. On average, production was expected to increase by 2 percent in the third quarter. For the fourth quarter, those predicting an acceleration in activity (53.8 percent) outpaced those forecasting a deceleration (21.2 percent).

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

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NY Fed: Manufacturing Activity Expanded Strongly in September

The Empire State Manufacturing Survey from the New York Federal Reserve Bank reported a strong increase in activity in September, its fastest pace in nearly five years. The composite index of general business conditions rose from 14.7 in August to 27.5 in September, with almost 46 percent of those taking the survey saying that conditions had improved in the month. Other measures were mostly positive, as well, including faster paces for new orders (up from 14.1 to 16.9) and shipments (up from 24.6 to 27.1).

Yet, there were also some challenges, most notably in the labor market. Hiring eased in September, with the index for the number of employees dropping from 13.6 to 3.3. This decline stemmed from an increase in those respondents who said that their employment levels had decreased, up from 5.7 percent in August to 16.3 percent in September. Along those lines, the average employee workweek (down from 8.0 to 3.2) also narrowed.

Pricing pressures continued to be elevated, even as there was a marginal improvement for the month. The index for raw material prices declined slightly, down from 27.3 to 23.9, but that still represents a significant percentage of manufacturers in the Fed district seeing input costs rise. That is expected to continue over the next six months, with nearly 46 percent of respondents anticipating higher prices.

The other forward-looking measures continue to find a mostly optimistic outlook in the New York Fed region. There was a slight pullback in many of the measures assessing the next six months, but manufacturing leaders remain upbeat overall. In fact, 57.1 percent of those completing the survey predict sales increases, or about the same proportion as those anticipating higher shipments. Just over one-quarter expect to add more workers in the coming months, with 29.4 percent planning additional capital expenditures.

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

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ISM: Manufacturing Activity Expanded Very Strongly in August

The Institute for Supply Management’s (ISM) manufacturing purchasing managers’ index (PMI) rose very strongly, with the headline figure rising from 57.1 in July to 59.0 in August. This was the highest level since March 2011, and it reflected a robust recovery from weaknesses earlier in the year.  Indeed, new orders (up from 63.4 to 66.7) and production (up from 61.2 to 64.5) appear to be expanding at quite healthy paces, with indices for both exceeding 60 once again. The production measure has been over 60 for three straight months; whereas the new orders index was at its fastest pace since April 2004. Export sales (up from 53.0 to 55.0) were also improved.

The sample comments tend to echo these strong figures. As one electrical equipment manufacturer said, “Overall business is improving. Order backlog is increasing. Quotes are increasing. Much more positive outlook in our sector.” This pretty much summed up the increase in demand seen in many of the other comments, as well. Yet, those taking the ISM survey also noted some challenges, particularly the geopolitical risks and the ability to attract labor. The other concern noted in past surveys was pricing pressures, but they appear to have eased somewhat in August (down from 59.5 to 58.0).

On this latter point, the employment index was marginally lower (down from 58.2 to 58.1), but hiring growth has clearly picked up from recent months. The hiring index averaged 52.7, for instance, through the first six months of the year, further highlighting the July and August acceleration in the data. This should bode well for manufacturing jobs numbers out on Friday, which have averaged 22,000 between May and July and 15,000 each month over the past year.

Overall, this report shows that manufacturers are seeing strong growth more recently in demand and output, which is definitely positive given the disappointing start to the year. Manufacturing leaders are mostly positive about the second half of 2014, even as they are keenly aware of possible risks on the horizon. This includes geopolitical events, a cautious consumer and labor shortages, among other concerns. Still, it is nice to see the sector hitting on all cylinders, and the outlook for strong growth over the coming months remains positive.

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

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Richmond Fed: Manufacturing Activity Expanded at Fastest Pace in Three Years

The Richmond Federal Reserve Bank said that manufacturing activity expanded at its fastest pace since March 2011 in August. The composite index of general business conditions rose from 7 in July to 12 in August, marking the fifth consecutive monthly expansion after winter-related contractions in both February and March. Indeed, much like other regional surveys, these data show an uptick in demand and production for manufacturers this summer, with a mostly upbeat assessment for the coming months.

Looking specifically at current activity, manufacturing leaders in the Richmond Fed district noted increased paces for many of the key measures. This included new orders (up from 5 to 13), shipments (up from 3 to 10), capacity utilization (up from 4 to 17) and the average workweek (up from 3 to 8). The index for employment (down from 13 to 11) edged slightly lower, but it still indicated decent growth in hiring and improvement from earlier this year. (Hiring growth was flat as recently as February.)

Enhanced perceptions about the current economic environment also carried through to better expectations about the future. The forward-looking indices for manufacturing activity were mostly higher, and each suggested relative strength over the next six months. For instance, the expected new orders variable rose from 34 to 47, its highest point since December 2010. Manufacturers also planned to expand employment (down from 19 to 18) and invest in more capital (up from 19 to 27), even though the former’s pace eased marginally for the month.

Inflationary pressures decelerated somewhat in August after increasing in July.  Manufacturers in the region said that prices paid for raw materials grew 1.39 percent at the annual rate in August, down from 1.99 percent in July. Yet, looking ahead six months, respondents expect input costs to increase an annualized 2.05 percent, up from 1.89 percent the month before. This suggests that businesses anticipate modest gains in input prices over the course of the second half of 2014, mostly in-line with Federal Reserve projections.

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

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Manufacturers in Texas Continue to Grow, but at a Somewhat Slower Pace in August

The Federal Reserve Bank of Dallas said that manufacturing activity continued to grow, but at a slower pace in August. The composite index of general business activity declined somewhat from 12.7 in July to 7.1 in August. It was the 15th consecutive month of expanding levels of activity; however, manufacturers reported a near-stagnant pace in February. As such, it suggests that manufacturing sentiment has rebounded since weather and other factors negatively impacted activity earlier in the year.

Nonetheless, with the composite index lower, many of the key subcomponents were less positive in August than in July. This included new orders (down from 13.0 to 2.2), production (down from 19.1 to 6.8), shipments (down from 22.8 to 6.4), hours worked (down from 6.3 to 2.9) and capital expenditures (down from 13.3 to 6.6). Hiring (down from 11.4 to 11.1) was only slightly lower, but still registering decent growth overall.

The declines in many of these indicators could simply be the result of very strong growth over the past few months, with August’s indices mostly sustaining past gains before moving forward. If that is the case, these latest data could reflect a “breather” before continued expansion in the months ahead.

In fact, manufacturers in the Dallas Fed region remain mostly positive about the next six months. The forward-looking measure of one’s company outlook rose from 24.4 in July to 30.1 in August, and several of the underlying data points also moved higher for the month. Over half of the survey respondents anticipate increased sales, production and shipments in the future, with nearly one-third planning new hires and over one-quarter expecting to increase their capital spending. The one negative remains elevated pricing pressures, with 45.5 percent of those taking the survey seeing higher input costs over the next six months versus just 1.9 predicted lower costs.

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

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Philly Fed: Manufacturers Continue to See Health Gains in August

The Federal Reserve Bank of Philadelphia reported healthy gains in manufacturing activity in August, with the fastest pace since March 2011. The Business Outlook Survey’s composite index of general business activity increased from 23.9 in July to 28.0 in August. This represents significant progress from earlier in the year, when activity contracted briefly in February. It was the fifth straight month with the headline index being in double digits, averaging 20.3 from April to August. This would indicate more than just a rebound; it would suggest relatively strong growth overall.

The various sub-components of the index also reflect a continued expansion in the manufacturing sector. With that said, they also suggest that July’s strengths were a bit of an outlier, with many of the key measures pulling back in August while still reflecting solid gains. For instance, the paces for new orders (down from 34.2 to 14.7) and shipments (down from 34.2 to 16.5) both eased; yet, nearly one-third of the survey respondents said that each increased for the month, with roughly half suggesting that they stayed the same.

The employment data were mixed, but still positive. Hiring growth (down from 12.2 to 9.1) decelerated a bit, but one-quarter of those taking the survey reported additional hires. At the same time, the average workweek (up from 12.5 to 13.3) widened somewhat, with 21.2 percent of respondents citing a longer workweek in August.

Looking ahead six months, manufacturers in the Philly Fed district were overwhelmingly upbeat. The future-oriented composite index jumped from 52.0 to 58.1. Moreover, 56.1 percent of survey-takers said that they expect their sales to increase in the coming months, with just 2.6 percent predicted declines. Likewise, over 60 percent predict increased shipments, nearly one-third plan to hire additional workers, and over one-quarter intend to increase capital expenditures. Still, pricing pressures remain a worry. In fact, 40.9 percent of manufacturers in the region anticipate increased raw material costs, with 2.7 percent seeing reduced input prices.

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

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Growth in Chinese and European Manufacturing Activity Slowed in August, While U.S. Was Up Sharply

Given the contraction seen in the Eurozone economy in the second quarter, analysts were eagerly anticipating the preliminary Markit Purchasing Managers’ Index (PMI) data released this morning. Indeed, the HSBC Flash Eurozone Manufacturing PMI decelerated from 51.8 in July to 50.8 in August, suggesting that growth in manufacturing activity on the continent has slowed to a crawl. Germany (down from 52.4 to 52.0) eased slightly, but with output falling to its slowest pace since June 2013. French manufacturers (down from 47.8 to 46.5) continue to struggle, with its Flash Manufacturing PMI contracting for the fourth straight month and new orders declining at their quickest pace since in 16 months.

For the Eurozone as a whole, manufacturing activity was slower across-the-board. New orders (down from 52.1 to 51.0), output (down from 52.7 to 50.9), exports (down from 52.6 to 52.1) and employment (down from 49.9 to 49.1) were all lower in August, with the latter contracting for the second consecutive month. Production growth was at its weakest point since Europe emerged from its deep recession 13 months ago. In essence, the good news was that European manufacturing activity did not contract in August, but it is clear that demand and output are moving in the wrong direction. These data will continue to be fodder for those looking for economic stimulus in the months ahead.

Meanwhile, the HSBC Flash China Manufacturing PMI was also much softer for the month, down from 51.7 in July to 50.3 in August. As such, manufacturing expanded for the third straight month, but only barely so. New orders (down from 53.3 to 51.3), output (down from 52.8 to 51.3) and export sales (down from 52.6 to 51.4) downshifted from a modest pace to slower growth, and employment (down from 49.4 to 48.2) deteriorated further. In fact, hiring has been negative in 16 of the past 17 months. While China has begun to stabilize its economy after weaknesses earlier in the year, these data show that there remains room for improvement.

Japan’s economy contracted in the second quarter, falling 1.7 percent in the second quarter or 6.8 percent year-over-year. Yet, the Markit/JMMA Flash Japan Manufacturing PMI (up from 50.5 to 52.4) seem to indicate that manufacturers are in a better mood, with a pickup seen in demand and output. This was the fastest pace since March, or before the imposition of a new tax in April that sent the economy lower. The underlying data were mostly higher, including sales (up from 51.2 to 54.4), production (up from 49.8 to 53.2), exports (up from 50.8 to 53.0) and hiring (up from 50.2 to 51.1).

Closer to home, the Markit Flash U.S. Manufacturing PMI was up sharply, up from 55.8 to 58.0. This was the highest level for manufacturing activity in the U.S. since April 2010. Both new orders (up from 59.5 to 60.8) and output (up from 59.7 to 60.2) were above 60, suggesting strong growth and closely mirroring similar data from the Institute for Supply Management (ISM). New export orders (up from 50.3 to 54.4) and employment (up from 51.2 to 54.6) were both higher, as well, with each recording modest expansions. Overall, these data were quite positive, indicating that the recent rebound in manufacturing activity in the U.S. (after softness in the early months of 2014) has begun to take hold.

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 in early September.

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

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NY Fed: Manufacturers in its District Have Expanded Strongly for Six Straight Months

The Empire State Manufacturing Survey from the New York Federal Reserve Bank said that businesses expanded strongly for the sixth straight month in August. Yet, while growth rates remain at decent levels, the pace of expansion eased somewhat for the month. The composite index of general business conditions declined from 25.6 in July, which was a four-year high, to 14.7 in August. Given the loftiness of July’s figure, it should probably not be much of a surprise that the index came back down to earth. The good news was that much of July’s increases were sustained, with 31.4 percent saying that conditions were better and 51.9 percent suggesting that they remained the same in August.

The underlying data were mixed. On the positive side, the growth rate for shipments (up from 23.6 to 24.6) and the average employee workweek (up from 2.3 to 8.0) both picked up, reflecting increased activity levels. At the same time, new orders (down from 18.8 to 14.1) and hiring (down from 17.1 to 13.6) decelerated slightly, even as they remained at decent growth levels. Pricing pressures remained elevated (up from 25.0 to 27.3), with nearly 30 percent of survey respondents suggesting that input costs were higher in August.

Meanwhile, manufacturers in the New York Fed’s district were significantly more optimistic about the next six months. The forward-looking composite index jumped from 28.5 to 46.8, its highest level since January 2012. Roughly 60 percent of those taking the survey said that they anticipate higher sales and output levels in the months ahead, with approximately 30 percent planning to hire more workers and invest in additional capital expenditures. Still, the average workweek is predicted to be unchanged six months from now, and 46.6 percent feel that raw material prices should increase.

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

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ISM: Healthy Expansion of Manufacturing Activity in July

The Institute for Supply Management’s (ISM) manufacturing purchasing managers’ index (PMI) was up strongly in July, building on the healthy gains seen in June. The headline PMI figure rose from 55.3 in June to 57.1 in July, its highest level since November. After declining sharply in January, sentiment has gradually moved higher each month, with the sector rebounding from winter-related disruptions and slow growth in the first quarter of this year. These findings are largely consistent with other indicators showing manufacturers cautiously optimistic about the next six months.

Production, in particular, appears to have recovered back to the stronger expansionary levels seen in the second half of last year. The index for production increased from 60.0 to 61.2, and it was the third straight month with the measure at 60 or greater. Note that output and sales growth both exceeded 60 for five consecutive months in 2013 (August to December) before that streak ended with weather factors in January. The pace of other components were also higher in July, including new orders (up from 58.9 to 63.4), supplier deliveries (up from 51.9 to 54.1) and employment (up from 52.8 to 58.2). The latter figure hopefully indicates positive news on hiring moving forward.

The sample comments echo the positive news seen in the data, but they also hint of possible weaknesses ahead. A transportation executive said, “Business is still very good and we are very optimistic for the rest of the year.” Yet, others are more restrained in their sales outlook, and world events are noted as possible risks to growth. For instance, a chemical manufacturer added, “Geopolitics still present a considerable risk as well as the European market.” Beyond these points, wage pressures are noted, with a petroleum and coal products respondent citing the need for salary increases “due to market competition and shortages in certain specialty skills.”

Along these lines, the ISM data also show both continued pricing pressures and an easing in export sales growth. The index for raw material costs edged higher (up from 58.0 to 59.5), with this indicator averaging 59.1 through the first seven months of 2014. That indicates an acceleration in input costs over the average of 53.8 seen for all of 2013, and it mirrors other inflation data. Regarding trade, the growth rates for exports (down from 54.5 to 53.0) and imports (down from 57.0 to 52.0) were both lower, and we have seen weaker international sales growth year-to-date in other data, as well.

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

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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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