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Hurricanes Likely Reduced Manufacturing Output and Labor Productivity in the Third Quarter

By | Economy, Shopfloor Economics | No Comments

The Bureau of Labor Statistics reported that manufacturing labor productivity plummeted by 4.4 percent at the annual rate in the third quarter, its first decrease in one year and the largest quarterly decline since the Great Recession. On the positive side, it was originally estimated to be a decline of 5.0 percent, with the latest revision lessening the decrease somewhat from what was originally thought. Overall, though, the data continue to reflect the damage from recent hurricanes, with output down by 1.1 percent in the manufacturing sector. At the same time, hours worked and unit labor costs in manufacturing rose by 3.5 percent and 4.8 percent, respectively. The sectoral breakdowns were similar, with labor productivity for durable and nondurable goods firms off by 4.7 percent and 4.4 percent, respectively. Read More

Hurricanes Likely Reduced Manufacturing Output and Labor Productivity in the Third Quarter

By | Economy, Shopfloor Economics | No Comments

The Bureau of Labor Statistics reported that manufacturing labor productivity plummeted by 5.0 percent at the annual rate in the third quarter, its first decrease in one year and the largest quarterly decline since the Great Recession. This was likely the result of reduced activity stemming from recent hurricanes, with output down by 2.1 percent in the sector. At the same time, hours worked and unit labor costs in manufacturing rose by 3.1 percent and 6.2 percent, respectively. The sectoral breakdowns were similar, with labor productivity for durable and nondurable goods firms off by 5.7 percent and 4.6 percent, respectively. It is hard to paint these data in a positive light, except to say that they are likely transitory, and we would expect a rebound in output and productivity in forthcoming data. With that said, manufacturing labor productivity has been virtually unchanged for five straight years, continuing a discouraging trend that we hope to reverse moving forward.

There was more encouraging news in the larger economy. Nonfarm labor productivity increased by an annualized 3.0 percent in the third quarter, its fastest quarterly growth rate in three years and up from a 1.5 percent gain in the second quarter. Output and hours worked rose by 3.8 percent and 0.8 percent, respectively, with unit labor costs up by 0.5 percent. Similar to the manufacturing data described above, nonfarm labor productivity has slowed considerably since the Great Recession, averaging 0.5 percent per year from 2011 to 2016. With the latest increase, nonfarm labor productivity has risen by 1.6 percent year-over-year, which was an improvement from recent trends, even as it remains lower than the 2.7 percent annual growth rate average seen from 2000 to 2007.

Manufacturing Labor Productivity Slowed in the First Quarter

By | Economy, Shopfloor Economics | No Comments

The Bureau of Labor Statistics reported that manufacturing labor productivity rose 0.4 percent in the first quarter of 2017, slower than the 2.0 percent gain in the fourth quarter of 2016. Nonetheless, it was the second straight quarterly increase in productivity in the sector, with fourth quarter activity rebounding from declines in each of the two prior quarters. In this release, output per worker in manufacturing increased 2.8 percent, its fastest quarterly rate since the second quarter of 2014. Unit labor costs increased 2.1 percent. There were large sectoral differences in the data, with labor productivity for durable goods firms down 1.1 percent in the first quarter but up 3.2 percent for nondurable goods manufacturers. As a result, unit labor costs rose 2.5 percent and 1.3 percent for durable and nondurable goods businesses in the quarter, respectively. Read More

Manufacturing Production Edged Down Slightly in November Following Two Months of Gains

By | Economy, Shopfloor Economics, Shopfloor Main | No Comments

The Federal Reserve said that manufacturing production edged down slightly in November, off 0.1 percent, after experiencing gains in both September and October. Manufacturers have struggled to increase demand over the past couple years, with a strong dollar and global headwinds dampening overall activity, but recent sentiment surveys – including the most recent one from the NAM – have reflected a rebound in activity. In that light, the latest production data serve as a disappointment, continuing to highlight ongoing struggles for the sector, even as other segments have seen progress. Along those lines, manufacturing production has risen just 0.1 percent on a year-over-year basis, suggesting essentially stagnant growth over the past 12 months. Manufacturing capacity utilization was also lower for the month, down from 74.9 percent to 74.8 percent. That was off from the 75.3 percent rate observed one year ago.   Read More

Manufacturing Production Data for August Were Disappointing

By | Economy, Shopfloor Economics, Shopfloor Main | No Comments

According to the Federal Reserve, manufacturing production fell by 0.4 percent in August. After two straight months of gains, this news was disappointing, even as it mirrored weaknesses found in other economic indicators in August. Moreover, manufacturing production has declined over the past 12 months, the first year-over-year decline since December. In addition, manufacturing capacity utilization decreased from 75.2 percent to 74.8 percent, a three-month low. As such, this report highlights the tremendous challenges in the sector. Nonetheless, manufacturers continue to be cautiously hopeful for increased activity over the coming months, as noted in our latest survey.

The current softness, though, means that policymakers need to focus more on priorities that will grow the economy and increase competitiveness. It also suggests that the Federal Reserve is likely to wait to raise rates. Along those lines, 45.5 percent of respondents to our survey felt that the Federal Open Market Committee would hike rates in December.

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Markit: U.S. Manufacturing Activity Grew at the Slowest Pace since September 2009

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U.S. manufacturing activity grew at the slowest pace since September 2009, according to preliminary figures from Markit. The Markit Flash U.S. Manufacturing PMI decreased from 51.5 in March to 50.8 in April. In general, the strong dollar and weaknesses abroad have dampened international demand and overall sentiment over the course of the past year. Manufacturing activity has decelerated significantly over the past 12 months, with the main PMI number down from 54.2 in April 2015. In this report, output (down from 51.4 to 50.3) and hiring (down from 52.1 to 50.2) each pulled back to a near-standstill, with exports (down from 50.0 to 48.5) contracting for the second time in the past three months. On the other hand, new orders (down from 52.8 to 52.0) continued to expand modestly, but with some easing for the month.

As such, this report stands in sharp contrast to the better-than-expected sentiment seen in the competing data from the Institute for Supply Management (ISM). In that release, new orders and output each grew surprisingly strong in March, lifting its manufacturing PMI value above 50 for the first time since August. It provided some encouragement after months of softness, even as other economic data – including this one from Markit – continue to suggest ongoing challenges. Read More

Markit: U.S. Manufacturing Activity in February Eased to its Slowest Pace since October 2012

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The Markit Flash U.S. Manufacturing PMI fell to its slowest pace in more than three years in February, a sign that challenges hitting the sector have not yet abated. The composite measure declined from 52.4 in January to 51.0 in February, and in general, manufacturing activity has decelerated over the course of the past year, down from 55.1 in February 2015. On the positive side, new orders (down from 53.6 to 51.7), output (down from 53.2 to 51.3) and employment (down from 52.8 to 51.5) expanded somewhat, just not as far as we might prefer, with the rate of growth slowing in February for each. On the other hand, exports (down from 51.1 to 49.1) returned to negative territory after two months of progress, a sign of just how much the stronger dollar and weaknesses abroad have dampened international demand and overall sentiment. Read More

Manufacturing Production Rebounded in January from Declines in November and December

By | Economy, Shopfloor Economics | No Comments

Manufacturing production rose 0.5 percent in January, rebounding from softness in the second half of 2015 and providing a little encouragement at the start of the new year. Manufacturing activity remains softer-than-desired, particularly given difficulties in growing export demand and with falling commodity prices. Over the course of the past year, manufacturing output has increased 1.2 percent, representing some progress from the 0.5 percent pace observed in the prior report. Yet, production has slowed considerably since January 2015, when the year-over-year rate was a more-robust 4.3 percent. Capacity utilization for manufacturers rose from 75.8 percent in December to 76.1 percent in January. Read More

Markit: China’s Manufacturing Sector Slowed Once More, Down to its Lowest Level Since March 2009

By | General | No Comments

The Caixin Flash China General Manufacturing PMI declined from 47.8 in July to 47.1 in August, its lowest level since March 2009. The Chinese manufacturing sector continues to struggle, with its PMI data contracting for the sixth consecutive month. Manufacturing activity was down across-the-board, including new orders (down from 47.2 to 46.3), output (down from 47.1 to 46.6), exports (down from 46.9 to 46.0) and employment (down from 47.2 to 46.0). The new orders figure was also at a post-recessionary low. Indeed, a number of economic statistics continue to reflect decelerating activity levels, particularly relative to the paces observed earlier in the year or last year. These include industrial production, fixed asset investments and retail sales. With that in mind, the Bank of China has devalued the yuan, down 2.9 percent in the past two weeks, and the Shanghai Composite Stock Market Index has plummeted more than 32 percent since June 12. Such sharp moves have prompted growth worries in financial markets around the world. Read More

Markit: Chinese Manufacturing Activity Slipped Further into Negative Territory in July

By | Economy | No Comments

The Caixin Flash China General Manufacturing PMI dropped from 49.4 in June to 48.2 in July, its lowest level since April 2014. Chinese manufacturing activity has now contracted in 7 of the past 8 months, continuing a deceleration trend in that nation’s economy. Indeed, all of the PMI subcomponents were in negative territory in July, with most of them slipping further. This included new orders (down from 50.3 to 48.1), output (down from 49.7 to 47.3) and exports (down from 50.3 to 46.6), with domestic and foreign demand declining once again after stabilizing slightly in June. Employment (up from 46.6 to 47.4) fell at a slower pace for the month, and yet, hiring has now decreased in 27 of the past 28 months. These data are consistent with recent economic indicators from China, which have reflected slower growth, particularly relative to the rates experienced at the end of last year or earlier. Read More