Tag: personal income

Monday Economic Report – December 1, 2014

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

The U.S. economy grew 3.9 percent at the annual rate in the third quarter, according to revised real GDP data released last week. This was better than the 3.5 percent original estimate, and more importantly, it suggests real GDP increased at an annualized 4.2 percent over the past two quarters. The report highlighted a number of positive elements in the economy, including healthy increases in consumer and business spending, goods exports and end-of-fiscal-year government spending. The revision also included better inventory replenishment numbers than originally estimated. (continue reading…)

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Personal Income and Spending Both Rose 0.2 Percent in October

The Bureau of Economic Analysis said that personal spending rose 0.2 percent in October, an improvement from being flat in September. This was slower than the 0.5 percent growth observed in August, however. Indeed, we have seen the year-over-year rate of spending growth fall from 4.2 percent in August to 3.6 percent in October. Still, this is a decent figure, indicating modest growth in consumer purchasing. In October, the increased spending occurred primarily with nondurable goods (up 0.2 percent) and services (up 0.3 percent). Durable goods orders (down 0.2 percent) fell for the second straight month. (continue reading…)

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Personal Spending Was Cautious in the Third Quarter, with Declines in September

The Bureau of Economic Analysis said that personal spending declined 0.2 percent in September, somewhat offsetting the 0.5 percent gain observed in August. Third quarter spending on consumer goods and services will go down as the slowest since the second quarter of 2012, up 1.5 percent at the annual rate. This suggests that Americans were more cautious in their spending behavior in the quarter than we might have preferred. In September, durable goods spending fell 2.0 percent in September, essentially counterbalancing the 2.1 percent gain of August. Weaker auto sales were likely behind the September decline. Nondurable goods purchases decreased for the second straight month, down 0.4 percent and 0.3 percent, respectively, in August and September. (continue reading…)

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Personal Spending Rebounded in August from Cautiousness in July

The Bureau of Economic Analysis said that personal spending rebounded in August after being unchanged in July. Personal spending increased 0.5 percent in August. Aside from the brief pause in July, consumers have been more willing to open their wallets since the weather-related storms in January. Indeed, since January, personal spending has risen 2.7 percent, with 4.1 percent growth year-over-year. The August consumption figure was boosted by strength in durable goods spending, which rose 1.8 percent for the month.

Meanwhile, personal income was also modestly higher, up 0.3 percent in August. Over the past 12 months, personal incomes have expanded by 4.3 percent. For manufacturers, total wages and salaries increased from $786.1 billion in July to $789.7 billion in August. This continues an upward trend for compensation in the sector, with average wages and salaries of $734.4 billion and $747.6 billion in 2012 and 2013, respectively.

With the pace of spending growth outpacing income growth in August, the savings rate edged down from 5.6 percent in July to 5.4 percent in August. Still, the longer term trend reflects upward movement in the savings rate, up from 4.1 percent in December.

In other news, the personal consumption expenditure (PCE) deflator was unchanged in August, with falling energy prices helping to reduce inflationary pressures. Nonetheless, food costs continue to move higher, up 0.3 percent in the month. On a year-over-year basis, the PCE deflator has increased 1.5 percent, down from 1.7 percent in May. Core inflation (which excludes food and energy costs) was also at a 1.5 percent pace in August. While pricing pressures have accelerated somewhat from earlier in the year, the recent easing will provide a little breathing room to the Federal Reserve as its seeks to normalize its policies.

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

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Personal Spending Data in July Show a Cautious Consumer Despite Recent Economic Progress

The Bureau of Economic Analysis said that personal spending fell 0.1 percent in July, its first decline since the weather-related storms in January. This finding mirrors recent news of flat retail sales in July, showing the consumer still cautious despite recent economic progress. Purchases of durable and nondurable goods fell by 0.7 percent and 0.1 percent, respectively, in July, with service-sector spending unchanged for the month. Nonetheless, personal spending has increased at an annualized 4.1 percent pace over the past six months. Hopefully, July’s figures represent a pause in what has otherwise been decent growth in consumer spending this year.

Personal income growth also eased to its slowest pace of 2014, down from 0.5 percent in June to 0.2 percent in July. Still, it was the seventh consecutive monthly increase in income growth, with personal incomes up 3.3 percent since December or 4.3 percent over the past 12 months. For manufacturers, total wages and salaries were unchanged at $787.3 billion in July, but they have risen 4.2 percent year-to-date (up from $755.3 billion in December).

The savings rate moved higher, up from 5.4 to 5.7 percent, with personal spending declining. That was the highest savings rate since December 2012. The rate has gradually moved higher so far this year, up from 4.1 percent in December.

In other news, the personal consumption expenditure (PCE) deflator eased somewhat in July, up 0.1 percent relative to 0.2 monthly percent gains from March through June. This reflects an increase in food prices (up 0.4 percent) that was mostly offset by a decline in energy prices (down 0.3 percent). The year-over-year pace was unchanged at 1.6 percent, with core inflation (which excludes food and energy costs) remaining at a 1.5 percent annual pace.

The Federal Reserve prefers the PCE deflator as its measure of inflation, and as such, it will welcome the news that pricing pressures have decelerated slightly over the summer months. At the same time, consumers will likely focus on the fact that both food (up 2.0 percent) and energy (up 2.4 percent) costs have risen modestly over the past 12 months, a pocketbook issue that they will notice when making purchases.

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

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Monday Economic Report – August 4, 2014

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

The U.S. economy has rebounded after a slow start to the year, with a number of data sources last week showing manufacturing activity growing strongly of late. First, real GDP increased by a healthy 4.0 percent in the second quarter, more than offsetting the 2.1 percent drop in output during the first quarter. Consumer and business spending spurred the higher figure. Inventory investments alone contributed one-third of the growth in real GDP for the quarter, with higher investment levels for housing, nonresidential structures, equipment and intellectual property. In addition, goods spending increased at its fastest pace since the fourth quarter of 2010. Net exports, however, continued to be a weakness, with growth in goods imports outstripping increases in goods exports. Moreover, one cannot help but be frustrated with weak economic growth so far this year, even if the outlook has improved. Real GDP rose by a frustratingly slow 0.9 percent in the first half of 2014. Fortunately, manufacturers are cautiously upbeat about future growth.

The Institute for Supply Management’s (ISM) manufacturing Purchasing Managers’ Index (PMI) increased from 55.3 in June to 57.1 in July. More importantly, the production index has measured 60 or more for each of the past three months, indicating strong output growth. Demand and hiring were also up sharply, but export sales growth eased, and raw material costs remained elevated. Similarly, the Dallas Federal Reserve Bank’s survey also noted accelerating manufacturing activity, with overall activity up for the 14th consecutive month. The underlying data in that report were mostly higher across-the-board, and at least 45 percent of respondents expect sales, production and shipments to increase over the coming months, with just single-digit percentages anticipating declines. These findings mirror those of other recent regional surveys.

Meanwhile, the latest jobs report was mostly positive, with manufacturers adding 28,000 workers on net in July. More than half of that stemmed from the automotive sector, signifying that, if anything, employment growth could be more broad-based within the sector, extending in particular to the nondurable goods sector more. Yet, manufacturing employment has picked up, averaging 22,000 over the past three months and nearly 15,000 per month since August. Moreover, we continue to hear about skills shortages in many locations, which could create wage pressures moving forward. In fact, during the second quarter, manufacturing wages and salaries increased at their fastest pace in more than a decade, driving up overall employment costs. Nonetheless, total compensation for manufacturers has risen by 2.1 percent year-over-year, suggesting that wage pressures remain in check for the most part—at least for now.

Along those lines, personal income and spending both increased by 0.4 percent in June. Since January, when winter weather dampened purchases, personal spending has risen 2.2 percent, with year-over-year growth of 4.0 percent. This suggests that Americans continue to spend at a decent pace, even if their purchase decisions remain selective and cautious. Furthermore, there were two consumer confidence surveys released last week, with each moving in opposite directions. The University of Michigan and Thomson Reuters found that sentiment edged lower in July, with little change in confidence since December and persistent anxieties about the future direction of the economy. In contrast, the Conference Board observed that sentiment was at its highest point since the beginning of the recession (December 2007), led by an improved perception about the labor market. However, rising confidence did not necessarily translate into increased buying intentions.

For its part, the Federal Reserve Board noted recent improvements in the economy, but it also believes there continues to be “significant underutilization of labor resources.” The Federal Open Market Committee (FOMC) voted to continue tapering its long-term and mortgage-backed security purchases, down from $35 billion to $25 billion per month. These purchases are expected to end by October. While the FOMC will keep short-term rates near zero for now, these rates are predicted to begin rising sometime early in 2015. Nonetheless, the Federal Reserve will continue to monitor incoming economic data, including inflationary pressures. Recent data have shown prices accelerating, but at least for now, they appear to be under control. For instance, core inflation, which excludes food and energy costs, has increased 1.6 percent over the past 12 months, according to personal consumption expenditure deflator data released last week.

There are just a handful of data releases this week. Highlights include the latest data on exports, factory orders and productivity.

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

real GDP forecast - aug2014

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Personal Income and Spending Rose Modestly in June

The Bureau of Economic Analysis said that personal income and spending both increased by 0.4 percent in June, building on the gains seen in May. Regarding compensation, personal income has risen for sixth straight months, or every month so far in 2014. Since December, personal income was up 3.0 percent, with 3.9 percent growth over the past 12 months. For manufacturers, total wages and salaries increased from $781.8 billion in May to $786.1 billion in June. Manufacturing wages and salaries have moved up from averages of $734.4 billion and $747.6 billion in 2012 and 2013, respectively.

Meanwhile, personal spending has expanded for five straight months, rebounding from winter-related softness in January. Since January, personal spending has risen by 2.2 percent, with year-over-year growth of 4.0 percent. That suggests that Americans continue to spend at a decent pace, even if their purchase decisions remain selective and perhaps still cautious. In June, growth in durable goods spending (up 0.5 percent) was outstripped by strong gains in nondurable goods purchases (up 1.0 percent).

The savings rate was unchanged at 5.3 percent. That represents an increase from the 4.1 percent pace observed in December, and in general, we have seen a slightly higher saving rate through the first six months of 2014 (averaging 5.1 percent) than what was observed for all of 2013 (4.9 percent).

In other news, the personal consumption expenditure (PCE) deflator found that pricing pressures eased somewhat in June, even as prices remained higher than earlier in the year. The year-over-year pace of consumer goods prices dropped from 1.9 percent to 1.7 percent, but this still represented an increase from the 1.0 percent noted in February. Core inflation, which excludes food and energy costs, have grown 1.6 percent over the past 12 months, down from 1.7 percent. Energy costs were up 1.7 percent in June, led by increased petroleum prices stemming from geopolitical events in the Middle East.

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

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Monday Economic Report – June 30, 2014

Here are the files for this week’s Monday Economic Report: 

The U.S. economy contracted in the first quarter more than we previously thought, with real GDP down 2.9 percent at the annual rate. The sharply lower revision was much worse than the previous estimate of a 1.0 percent drop. Decreased inventory spending and weaker goods exports accounted for much of the decline in output, but consumer spending on services also increased at a slower pace than earlier reports suggested, contributing to the latest revision. Fixed investment and government spending were also drags on growth. Overall, the data confirm that economic activity started 2014 on a disappointing note, but they also suggest that this softness went beyond weather-related slowdowns.

However, the real GDP data also point to a possible strong rebound in the current quarter. For instance, inventory spending is likely to pick up as more firms restock their shelves. In addition, other data point to recoveries in manufacturing activity and retail sales in the second quarter, which should help boost consumer and business spending figures. Real GDP should exceed 3 percent in the second quarter, bouncing back from the weak data in the first quarter. Moreover, manufacturers remain mostly positive about the second half of this year. Perhaps that is why financial markets seemed to mostly shrug off the bad news on real GDP last week.

Indeed, many of the measures of health for the manufacturing sector remain encouraging. The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) increased from 56.4 in May to 57.5 in June. This was its fastest pace in more than four years, led by strong gains in both new orders and output. Manufacturer sentiment in both China and Japan also stabilized after contractions in previous months. At the same time, manufacturing activity in the Kansas City and Richmond Federal Reserve Bank districts continued to expand, albeit with both at slower paces than the month before. These two releases were largely consistent with other regional surveys, including those from New York and Philadelphia, showing rebounds since the winter months.

Still, not all of the manufacturing news out last week was positive. Durable goods orders fell 1.0 percent in May, reflecting weaker-than-anticipated growth for the sector. Much of that decline stemmed from reduced nondefense aircraft and parts sales, although the broader data were also mixed. Meanwhile, European manufacturing activity continued to decelerate. The Markit Flash Eurozone Manufacturing PMI declined from 52.5 to 51.9, falling for the second straight month. Slower growth on the continent has weakened many of the key activity measures, including new orders, output, exports and employment. Of course, it is also worth noting that Europe’s expansion remains uneven, with Germany seeing a marginal gain in activity in June while France fell back into a contraction.

In other news, personal spending improved in May after remaining flat in April, assisted by a decent rebound in durable goods purchases. Personal income also showed a slight uptick, with manufacturing wages and salaries continuing to move higher. Such reports have helped to lift consumer confidence, with data from the Conference Board’s index increasing to its highest level in more than six years. The consumer sentiment measure from the University of Michigan and Thomson Reuters also edged higher, but with persistent anxieties about future economic and income growth. Finally, there were encouraging headlines on the housing market last week, with strong gains in both existing and new home sales in May.

This week, we will get new jobs numbers on Thursday—one day earlier due to the Independence Day holiday on Friday. I would expect employment growth similar to what we saw in May, with a consensus estimate of 210,000 additional nonfarm payroll workers and around 10,000 or so net new manufacturing employees. There will also be new PMI data from the Institute for Supply Management and international trade figures. Each will be closely watched, with manufacturing activity expected to pick up and we hope better news for exports. Other highlights include news releases for construction spending, factory orders and manufacturing activity in the Dallas Federal Reserve district.

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

contributions to change in real GDP - jun2014

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Personal Spending Rebounded Slightly in May, Especially for Durable Goods

The Bureau of Economic Analysis said that personal spending increased 0.2 percent in May, an improvement from being essentially flat in April. In particular, durable goods purchases rose 0.7 percent, rebounding from a decline of 0.9 percent the month before. Nondurable goods and service-sector spending increased by 0.2 percent and 0.1 percent, respectively. Overall, the data suggest that consumer spending has largely recovered from winter-related softness in December and January, with personal spending up 1.4 percent since January. On a year-over-year basis, consumers have spent 3.7 percent.

Meanwhile, personal income rose for the fifth consecutive month, up 0.4 percent in May. Through the first five months of 2014, personal incomes have grown 2.0 percent, with year-over-year growth of 3.5 percent. For manufacturers, total wages and salaries increased from $760.8 billion in April to $765.8 billion in May. Manufacturing wages and salaries have moved up from averages of $735.4 billion and $747.4 billion in 2012 and 2013, respectively.

With personal income growth outpacing spending, the savings rate edged up from 4.5 percent to 4.8 percent. This was the highest level since September, and a definite improvement from March’s 4.2 percent pace.

The other closely-watched aspect of this report was the personal consumption expenditure (PCE) deflator, a widely used measure of pricing pressures in the economy. In fact, it is the measure that the Federal Reserve prefers to use when it assesses inflationary tendencies. As we have seen in other indicators, the PCE deflator reflects consumer prices that are rising, with the annual pace rising from 0.8 percent in February to 1.6 percent in April to 1.8 percent in May. Rising food and energy costs were the largest factors in this recent run-up, with monthly increases of 0.6 percent and 0.8 percent, respectively, in May.

Core inflation, which excludes food and energy costs, have grown 1.5 percent over the past 12 months, up from 1.1 percent in February. This suggests that pricing pressures remain below the Fed’s 2 percent target. Yet, it is something that the Fed and other analysts will continue to watch in the coming months.

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

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Personal Spending Dipped Slightly in April Following Two Months of Strong Gains

The Bureau of Economic Analysis said that personal spending decreased 0.1 percent in April, its first decline in 12 months. However, this followed two months of strong gains – up 0.6 percent and 1.0 percent, respectively, in February and March. Indeed, consumer spending increased 1.6 percent year-to-date, with purchases up 4.3 percent. The decline in consumer purchases in April stemmed from reduced spending on durable goods (down 0.5 percent) and services (down 0.1 percent). Spending on nondurable goods rose 0.1 percent for the month.

Meanwhile, personal income growth slowed somewhat, down from 0.5 percent in March to 0.3 percent in April. Nonetheless, it was the fourth straight month of positive growth, with incomes rising 1.6 percent since December and 3.6 percent year-over-year.

For manufacturers, total wages and salaries decreased from $763.8 billion in March to $762.6 billion in April, but this was still higher than the $756.0 billion recorded in February. As such, the spring rebound was mostly sustained, and the longer-term trend remains a positive one. Manufacturing wages and salaries have moved up from averages of $707.1 billion, $735.4 billion, and $747.4 billion in 2011, 2012, and 2013, respectively.

With personal spending down, the savings rate rose from 3.6 percent in March to 4.0 percent in April. Even with the increase, the savings rate has decelerated of late. For instance, the savings rate dropped from an average of 5.3 percent through the first 11 months of 2012 (omitting December because of accelerated payouts due the fiscal cliff) to 4.5 percent in 2013.

Inflationary pressures remain minimal, with prices for core personal consumption expenditures (PCE) up 1.6 percent year-over-year. However, this was up from 0.9 percent in February and 1.1 percent in March, suggesting a pickup in prices.

In April, there acceleration stemmed from higher energy costs (up 0.4 percent). The price of West Texas intermediate crude, for instance, averaged $102.07 a barrel in April, up from $94.62 in January and $100.80 in March. Food prices rose 0.3 percent, slower than the 0.5 percent gain the month before. Core inflation – with excludes food and energy – increased just 0.2 percent, with year-over-year growth of 1.4 percent.

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

 

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