Tag: output

Markit: Chinese Manufacturing Activity Has Contracted in Each Month So Far in 2014

The HSBC Flash China Manufacturing Purchasing Managers’ index (PMI) continued to decelerate, down from 48.5 in February to 48.1 in March. The index has contracted for three consecutive months, with March’s pace being the slowest since July. As noted in the most recent Global Manufacturing Economic Update, these data mirror the easing that we have seen in other indicators, including industrial production, fixed asset investment, and retail sales. As such, they also suggest that real GDP might fall below the 7.7 percent rate seen in the fourth quarter.

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 April 1. The March data reflect decelerating levels of activity for new orders (down from 48.1 to 46.9) and output (down from 49.2 to 47.3). On the positive side, export sales shifted from contraction (49.3) to a slight expansion (51.4), and employment growth declined at a slower rate (up from 46.9 to 49.3).

Hongbin Qu, HSBC’s China Chief Economist and the Co-Head of Asian Economic Research, said, “Weakness is broadly-based with domestic demand softening further. We expect Beijing to launch a series of policy measures to stabilize growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower.”

Meanwhile, Eurozone manufacturers have seen expanding levels of activity for nine straight months, with continued modest growth in March. Nonetheless, the Markit Flash Eurozone Manufacturing PMI edged slightly lower, down from 53.2 in February to 53.0 in March. The underlying data were mixed. Sales growth picked up marginally from 54.1 to 54.4, but production (down from 55.5 to 55.4), exports (down from 54.7 to 53.6), and hiring (down from 50.4 to 50.3) moved slightly lower. Still, growth in output and new orders remained relatively healthy, even with some easing in many of the key figures.

One of the lagging economies in Europe has been France, which had contracting levels of manufacturing activity in all but 2 of the past 27 months. The good news was that French manufacturing sentiment turned positive once again in March, with the Markit Flash France Manufacturing PMI up from 49.7 to 51.9. Activity was up across the board, and growth in new orders (up from 46.6 to 53.3) were at their highest level since June 2011. Elsewhere in Europe, German manufacturing activity slowed a bit, down from 54.8 to 53.8. Despite the deceleration, output (down from 57.6 to 57.0) and sales (down from 57.2 to 55.6) growth remained strong.

Likewise, the Markit Flash U.S. Manufacturing PMI moved lower for the month, down from 57.1 to 55.5. February’s figure reflected the strong rebound from January’s weather-related softness due to severe winter storms. Much like the European data, the larger story is the continued modest growth for manufacturers in the U.S. market. For instance, new orders (down from 58.8 to 58.0) continued to grow strongly even with a little easing for the month, and production (up from 57.2 to 57.5) and exports (up from 50.9 to 51.0) had a slightly faster pace of growth.

Employment growth (down from 54.0 to 53.9) was essentially unchanged for the month despite edging a bit lower for the month. After hiring nearly stalled last June, manufacturers have continued to add to their workforces, albeit at a modest pace.

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

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Markit: Chinese Manufacturing Contracts Further, While U.S. Activity Rose Sharply in February

The HSBC Flash China Manufacturing Purchasing Managers’ Index (PMI) decelerated further in February, contracting for the second straight month. The index declined from 49.5 in January to 48.3 in February, its lowest level since June. 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 March 3.

This data suggests that overall manufacturing activity remains soft in China. Hongbin Qu, HSBC’s China Chief Economist and the Co-Head of Asian Economic Research, suggested that “Beijing policy makers should and can fine-tune policy to keep growth at a steady pace in the coming year.”

Unlike in January, all of the key indicators were in contraction territory. This included the index for output, which fell from 51.3 to 49.2. As such, after expanding for six consecutive months, manufacturing production in China turned negative. Meanwhile, new orders (down from 49.8 to 48.1), exports (up from 49.0 to 49.3), employment (down from 47.8 to 46.9), and finished goods inventories (down from 51.3 to 49.7) were all contracting, as well.

This report suggests that the easing that we saw in Chinese industrial production at the end of 2013 has continued into 2014. Industrial output decreased from a year-over-year pace of 10.3 percent in October to 10.0 percent in November to 9.7 percent in December. At the same time, we should caution that China continues to grow quite steadily, as witnessed by the above numbers but also by the fact that real GDP increased 7.7 percent in the fourth quarter. This indicates that the Chinese economy continues to grow solidly, even if it is slower than the double-digit rates that some had been accustomed to a few years ago.

In contrast to China, the Markit Flash U.S. Manufacturing PMI rose sharply, up from 53.7 in January to 56.7 in February. Given the fact that several other economic indicators have shown negative impacts due to weather, the jump in sentiment in Markit’s survey was a bit of a surprise. Indeed, the pace of growth for new orders (up from 53.9 to 58.8) and output (up from 53.5 to 57.2) were both up significantly. That was the highest level for sales growth since May 2010, a hopeful sign that some of the momentum that we saw in the U.S. manufacturing sector in the second half of last year might be flowing over into 2014.

The expansion was mainly due to domestic factors, but export sales also expanded for the month, albeit with less gusto (up from 48.9 to 50.9). Inventory stockpiles declined at a slower rate (up from 45.0 to 45.7). Hiring also picked up in February (up from 53.2 to 54.0), growing modestly. According to Markit, the increase in employment was the result of “greater production requirements, confidence in the economic outlook and, in some cases, pressures on operating capacity.”

Meanwhile, the Markit Flash Eurozone Manufacturing PMI declined from 54.0 to 53.0. Despite the slight easing in activity, this was the eighth consecutive month of expansion for the Eurozone, which continues to be welcome news for a continent still grappling with the effects of its deep two-year recession. Nonetheless, the pace of growth decelerated across-the-board, including new orders (down from 55.4 to 54.1), output (down from 56.7 to 55.5), exports (down from 55.2 to 54.7), and employment (down from 50.7 to 50.4).

German manufacturing activity followed the Eurozone trend (down from 56.5 to 54.7), with sales and production growth off marginally in February. One bit of good news, however, was that French manufacturers reported positive growth for the first time since February 2012 (up from 48.8 to 50.5). Yet, while output was higher in France (up from 48.2 to 50.5), new orders remained quite weak (down from 47.9 to 46.6).

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

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Monday Economic Report – February 18, 2014

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

A perfectly timed winter storm at the end of last week coincided with news that cold weather has had a negative impact on consumer spending and manufacturing output. Manufacturing production declined 0.8 percent in January, ending five straight months of expanding activity. Poor weather conditions closed some facilities and hampered shipments. Capacity utilization also decreased, down from 76.7 percent in December to 76.0 percent in January. That was the lowest utilization level since July. Yet, to the extent that weather contributed to the fall in manufacturing output, I would expect production to rebound in the coming months. After all, manufacturing production increased 3.0 percent in the second half of 2013, and manufacturers continue to be mostly upbeat about demand for 2014.

Nonetheless, we saw the effects of the weather in other indicators released last week as well. Retail sales fell 0.4 percent in January, extending December’s 0.1 percent decline. Reduced auto sales were a major factor in this decrease, with motor vehicle purchases down 1.8 percent in December and 2.1 percent in January. If you exclude autos from the analysis, retail spending was unchanged.

Although the University of Michigan and Thomson Reuters consumer sentiment measure was unchanged in February, respondents’ view of the current economy has slipped since December. One might surmise that weather impacted labor markets and incomes, lessening current confidence. However, Americans seem more optimistic about the future, with the expectations component rising from 71.2 in January to 73.0 in February.

There were signs that the U.S. economy’s recent improvements continue to bear fruit. Small business leaders have become more confident, with the National Federation of Independent Business’s Small Business Optimism Index edging higher for the third straight month, and January’s data also show an increased willingness to add workers. The net percentage planning to hire in the next three months rose to its highest level since September 2007. Along those lines, the number of manufacturing job postings increased from 283,000 in November to 297,000 in December. We have seen job openings in the sector recover from weaknesses midyear in 2013. Nonetheless, manufacturing net hires eased in December, and there was notable softness in the larger economy, both for new hires and job openings.

This week, we will get new numbers for the housing market and the latest data on manufacturing activity from a number of sources, including surveys from the New York and Philadelphia Federal Reserve Banks and Markit. The latter will report Flash Purchasing Managers’ Index (PMI) findings for the United States, China and the Eurozone. We will be looking for further evidence on the impact weather has had for manufacturers in the United States and for signs of improvement overseas. The Chinese PMI data had contracted in January’s report, but with output continuing to grow modestly. (For more information on worldwide trends, see the Global Manufacturing Economic Update, which was released on Friday.) Other highlights for the week include the latest data on consumer and producer prices, leading indicators and existing home sales.

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

retail sales - feb2014

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Manufacturing Production Declined 0.8 Percent in January, Likely Pulled Lower by Poor Weather

The Federal Reserve Board said that manufacturing production declined 0.8 percent in January, the first decrease in output in six months. The reduction in production was likely pulled lower by poor weather conditions, which we have seen in other indicators, as well. Still, the decrease was larger than anticipated, with overall industrial production well below the consensus expectation of a 0.3 percent increase. Mining production was also lower for the month, down 0.9 percent; whereas, utility output – most likely driven by colder temperatures – was up 4.1 percent.

The year-over-year pace of manufacturing output declined from 2.0 percent in December to 1.3 percent in January. Moreover, manufacturing capacity utilization fell from 76.7 percent to 76.0 percent. While these declines are significant, they are likely temporary, to the extent that weather was the main contributing factor.

Looking specifically at the January data, manufacturing output was off mostly across-the-board, with all but four of the 19 major sectors experiencing declines. Durable and nondurable goods production each decreased by 0.8 percent. The largest decline came in the motor vehicle sector, with monthly output down 5.0 percent. Other sectors with substantial losses included wood products (down 2.6 percent), electrical equipment and appliances (down 1.9 percent), textile and products mills (down 1.7 percent), printing and support (down 1.3 percent), food, beverage and tobacco products (down 1.2 percent), and furniture and related products (down 1.1 percent).

At the same time, there were increases in production observed in the computer and electronic products (up 0.9 percent), nonmetallic mineral products (up 0.7 percent), machinery (up 0.6 percent), and apparel and leather (up 0.2 percent).

In short, production and capacity utilization figures for the manufacturing sector were off sharply in January. This was particularly disappointing given the strong increases in demand and output that we saw at year’s end. Indeed, manufacturing production rose 3.0 percent at the annual rate in the second half of 2013, providing some momentum for 2014. Yet, January’s reductions in output were more than likely due to poor weather conditions, which closed some facilities and hampered shipments. To the extent that weather was a contributing factor, I would expect for manufacturing production to rebound in the coming months.

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

industrial production

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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.

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Markit: Cold Weather Hurts U.S. Production, and Chinese Output Contracts for First Time since July

The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) eased somewhat, down from 54.4 in December to 53.7 in January. 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 February 3. All of the key subcomponents of the index were lower to begin the new year, with winter weather impacting overall U.S. production.

For instance, the index for output dropped 3.9 points from 57.3 to 53.4. As such, production growth continued to expand, but at the slowest pace in three months. Similarly, there were lower data points for new orders (down from 56.1 to 54.1) and employment (down from 54.0 to 53.2). To the extent that sales growth was positive, it stemmed largely from domestic increases. New export orders (down from 51.4 to 48.9) contracted slightly in January for the first time since September.

Despite the deceleration in activity in January, the longer-term trend for U.S. manufacturers has generally shown improvement. After weaknesses in the spring months (e.g., the Markit Manufacturing PMI bottomed out at 51.9 in May), the data have made progress in recent months, reflecting modest growth overall. If cold weather contributed to January’s slower activity, the impact should be temporary, and we should get some indication of that, either in the final data release or in the February numbers.

Meanwhile, financial markets have reacted to news that manufacturing activity in China has unexpectedly contracted. The HSBC Flash China Manufacturing PMI fell from 50.5 in December to 49.6 in January. This was the first decline since July, following stabilization in the Chinese economy over the past six months. The reduction in the overall PMI figure stemmed largely from fewer new orders (down from 51.8 to 49.8) and exports (down from 50.3 to 49.0). Hiring continued to be negative (down from 48.8 to 47.8), with the employment index below 50 each month since March.

On the other hand, the manufacturing output data (down from 51.8 to 51.3) remain expansionary, albeit at a slower pace than the month before. In fact, the output measure has exceeded 50 for six consecutive months, suggesting that growth might be soft but it is still expanding modestly. Indeed, real GDP in the fourth quarter of 2013 decelerated, as well, from an annual rate of 7.8 percent in the third quarter to 7.7 percent. Nonetheless, the Chinese economy continues to grow solidly, even if it is slower than the double-digit rates that some had been accustomed to a few years ago.

In contrast to the Chinese and U.S. reports, European manufacturing activity strengthened. The Markit Flash Eurozone Manufacturing PMI increased from 52.7 in December to 53.9 in January. This was the highest point for the PMI since May 2011. The underlying data were mostly higher, including new orders (up from 54.2 to 55.4), output (up from 54.8 to 56.7), exports (up from 53.9 to 55.2), and employment (up from 49.9 to 50.7). The hiring figure is notable in that it was the first time since January 2012 that net employment growth was positive.

The pace of growth has varied from country to country, with German manufacturing accelerating (up from 54.3 to 56.3) but French production continuing to contract (up from 45.2 to 48.2), albeit with a slower rate of decline.

Even with stabilizing conditions in Europe, growth on the continent remains far from robust, with real GDP in the third quarter up just 0.1 percent and some worries about deflation, with pricing pressures decelerating. Despite such worries, the Markit PMI data reflect modest growth in output prices, which have been slightly expansionary since July.

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

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Monday Economic Report – January 21, 2014

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

Manufacturing production rose 2.6 percent in 2013, slowing from the 3.5 percent and 3.2 percent growth rate experienced in 2011 and 2012, respectively. Yet, the lower 2013 figure stemmed largely from weaknesses in the first half of the year, with manufacturing output rising an annualized 4.2 percent in the second half. As such, the sector ended the year on a strong note, with a pickup in demand and cautious optimism for 2014. Indeed, a number of other reports reached the same conclusion. Surveys from the New York and Philadelphia Federal Reserve Banks and from the Manufacturers Alliance for Productivity and Innovation (MAPI) both observed expanding levels of activity in their latest releases. Respondents to these surveys tended to be mostly upbeat about new orders, shipments, exports and hiring over the coming months—which is definitely good news.

Over the past couple years, the rebound in the housing sector has been one of the bright spots in the U.S. economy. Housing starts were lower in December, but it seems the November data were a bit of an outlier. Absent that soaring figure, new residential construction was generally higher to end 2013, particularly for single-family units. New single-family starts increased 7.6 percent year-over-year. Housing permits also eased slightly in December but increased 4.6 percent from the year before. The reduction in housing activity could have been due to severe winter storms, with somewhat higher borrowing costs as another possible contributing factor. The average 30-year mortgage rose from 4.29 percent in the week of November 27 to 4.48 percent in the week of December 26, according to Freddie Mac. Nonetheless, this still historically low rate helps to explain the generally upbeat assessment of home builders.

Meanwhile, the pace of retail sales slowed in December, with reduced auto sales dragging the overall figure lower. Still, motor vehicle sales increased 5.9 percent in 2013, making it one of the stronger components of consumer spending growth. Excluding autos, retail sales would have risen by 0.7 percent last month, suggesting broader strength than the headline figure implies. On a year-over-year basis, total retail spending increased 4.1 percent, a modest pace that marks the slowest since 2009.

The two measures of sentiment moved in opposite directions. Preliminary data from the University of Michigan and Thomson Reuters on consumer confidence was surprisingly lower for the month, down from 82.5 in December to 80.4 in January. The December data has noted a recovery in perceptions about the economy after falling in the wake of the government shutdown, and the expectation had been for January’s data to extend those gains. With a reduction in sentiment instead, this suggests that the public remains somewhat anxious about economic conditions. At the same time, the National Federation of Independent Business (NFIB) noted an increase in optimism for the second straight month. Underneath the main reading, however, the data were mixed, with more small business owners calling it a “good time to expand” but with sales and earnings remaining subpar.

In terms of news events, outgoing Federal Reserve Chairman Ben Bernanke delivered a speech at the Brookings Institution that provided his take on the lessons learned from the financial crisis. This “exit interview”—as it has been widely dubbed—was mostly a valedictory address defending the Fed’s monetary actions to help stimulate growth in the economy. Coincidently, Bernanke gave it on the same day that the Bureau of Labor Statistics reported that core consumer inflation had risen by just 1.7 percent over the past year. A similar conclusion on producer prices had been released the day before, and in each case, the data suggested that pricing pressures were increasing within an acceptable range, at least for now, according to the Fed’s stated targets.

There will only be a handful of economic data releases this week. From the manufacturing perspective, the highlights will come on Thursday. Markit will provide “flash” estimates for its purchasing managers’ index (PMI) reports for the United States, the Eurozone, and China. In addition, the Kansas City Fed will discuss the latest results of its regional manufacturing survey. In each instance, the expectation will be for manufacturers to note continued growth, building on recent gains. Other data releases include updates on the leading economic index and existing home sales.  

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

manufacturing production - jan2014

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Manufacturing Production Increased 2.6 Percent in 2013

The Federal Reserve Board said that manufacturing production increased 0.4 percent in December, extending the 0.6 percent gains experienced in both October and November. This was the fifth consecutive monthly gain in manufacturing output, with the sector recovering from weaknesses seen in the spring months. Year-to-date growth in the manufacturing sector has definitely improved from the 1.2 percent pace experienced in July to 2.6 percent in December.

Manufacturing capacity utilization has also increased over the past few months, up from 75.7 percent in July to 76.9 percent in November to 77.2 percent in December. This was the highest level since March 2008 for the manufacturing sector.

Nondurable goods production outpaced durable goods output growth in December, up 0.9 percent versus 0.1 percent, respectively. With that said, on a year-over-year basis, durable goods output was up more strongly, up 4.1 percent since December 2012. Nondurable goods production rose a more modest 1.3 percent in 2013.

The strongest manufacturing output growth in December occurred in the following manufacturing sectors: printing and support (up 1.9 percent), motor vehicles and parts (up 1.6 percent), electrical equipment and appliances (up 1.4 percent), primary metals (up 1.4 percent), food, beverage and tobacco products (up 1.2 percent), apparel and leather (up 1.1 percent), petroleum and coal products (up 0.9 percent), and chemicals (up 0.8 percent).

With this being the last data point of 2013, we get a good glimpse of what sectors experienced the greatest output gains for the year. Certainly, much has been made of the rebound in the automotive sector, which had production growth of 7.2 percent for the year. Yet, the largest year-over-year increase occurred in the furniture and related products sector, up 9.4 percent. Other sectors with large gains in output in 2013 included fabricated metal products (up 4.5 percent), computer and electronic products (up 4.3 percent), aerospace and miscellaneous transportation (up 3.8 percent), wood products (up 3.8 percent), plastics and rubber products (up 3.7 percent), petroleum and coal products (up 3.1 percent), and electrical equipment and appliances (up 3.0 percent), among others.

Overall industrial production also grew strongly, up 0.3 percent in December. This extended the 1.0 percent gain experienced in November. In addition to manufacturing, industrial production data were boosted by a strong increase in mining output, up 0.8 percent for the month and 6.6 percent year-over-year. Meanwhile, while utility production rose 7.6 percent in 2013, it provided a drag of 1.4 percent in the December report.

In conclusion, manufacturing activity continues to expand, a trend that we have seen since the beginning of the third quarter. Manufacturers are generally upbeat about production growth in 2014, and these data suggest that output growth was up strongly as we ended 2013. Many observers feel that this might be the year that the economy finally starts to gain some traction, with real GDP and industrial production growth of 3 percent or more.

Yet, we have begun past years with a similar feeling of cautious optimism only to have such sentiment derailed. To keep the momentum going, policymakers should enact pro-growth measures that will keep allow manufacturers to expand and flourish, building on recent progress.

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

industrial production

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ISM: New Orders Continue to Grow Strongly in December, with Some Easing in Other Measures

The Institute for Supply Management (ISM) said that the purchasing managers’ index (PMI) eased slightly from 57.3 in November to 57.0 in December. Despite the lower figure, the underlying report was a positive one overall. The ISM data has reflected expanding manufacturing activity for seven consecutive months. Moreover, the manufacturing PMI measures averaged 56.3 in the second half of 2013, a nice improvement from the 51.5 average seen in the first half of the year.

One of the strongest elements in the ISM manufacturing report continues to be the sales component. The index for new orders has exceeded 60 for five straight months, indicating an extremely healthy pace for sales growth. The new orders index rose from 63.6 in November to 64.2 in December. This increase appears to be primarily from domestic sales. The index for export orders dropped from 59.5 to 55.0 for the month, suggesting some easing in our sales overseas.

The production index also reflects strong growth, albeit with a marginal decline in its pace in December (down from 62.8 to 62.2). It averaged 61.7 from July to December, far exceeding the 52.6 average experienced from January to June.

Looking at other measures, hiring appears to be moving in the right direction, with modest employment growth overall. The employment index increased from 56.5 to 56.9. This was the fastest pace since April 2012. At the same time, inventory growth moved negative once more, down from 50.5 to 47.0, the first decline in stockpiles since August.

In general, this report shows that manufacturing activity in the U.S. grew strongly in the second half of 2013, with overall new business up significantly. The indices for new orders and production continue to reflect healthy increases, and manufacturers tend to be mostly upbeat about future activity, as evidenced by other indicators. Moving forward, it will be important for policymakers to keep the momentum going by considering pro-growth measures that will allow the sector to flourish and build on the progress seen over the past few months.

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

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MAPI: Manufacturing Production Expected to Increase 3.1 Percent in 2014

The Manufacturing Alliance for Productivity and Innovation (MAPI) released its industrial outlook for next year. It predicts industrial production growth of 3.1 percent in 2014, up from the 2.1 percent rate seen for 2013. Moreover, it expects output to continue to accelerate into 2015, with production growth of 4.1 percent forecasted.

This relatively upbeat assessment of future activity in the sector is buoyed by several factors, according to MAPI. It says that “surprisingly robust employment growth” and rising wealth from higher asset prices will lead to stable growth in consumer spending. In addition, improvements in the global economy should increase overall export sales, which have risen disappointingly slow in 2013. Beyond that, the recently-passed government budget deal should help to alleviate some of the uncertainty in the market, at least to the extent that we will not have another shutdown for the next two years. This means that government uncertainty should provide less of a drag than what we have seen this year.

MAPI expects the housing sector to continue to rebound, with housing starts accelerating in both 2014 and 2015. Just yesterday, we received a positive affirmation of this with very strong numbers for housing starts in November. They also forecast 5 percent growth in private, nonresidential construction next year, with public sector construction spending flat.

Looking at specific sectors, MAPI anticipates healthy gains of five percent or more in the following manufacturing segments: aerospace products and parts; communications equipment; electrical lighting equipment; engine, turbine, and power transmission equipment; household appliances; industrial machinery; iron and steel products; mining and oil and gas field machinery; and ventilation, heating, air conditioning, and commercial refrigeration equipment.

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

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