Tag: personal spending

Monday Economic Report – March 31, 2014

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

The U.S. economy grew 2.6 percent in the fourth quarter, according to the most recent revision, and for 2013 as a whole, real GDP growth was a rather lackluster 1.9 percent. Consumer spending, business investment and net exports were bright spots in the fourth quarter, with reduced government spending subtracting nearly one percentage point from growth.

Meanwhile, business economists predict real GDP growth of 2.8 percent on average for 2014, with 1.9 percent growth in the current quarter. (My own forecast is marginally higher for both, up 3.0 percent for the year and 2.1 percent for the first quarter of 2014.) Weather-related slowdowns account for the deceleration in activity, particularly for manufacturers, in the current quarter. However, modest growth is expected to resume once temperatures warm up, and we have already begun to see that. The National Association for Business Economics (NABE) Outlook Survey also suggested that the industry should grow 3.2 percent in 2014 and 3.4 percent in 2015, which would indicate a pickup from the current pace.

The latest manufacturing surveys show a rebound in sentiment after softness from December to February. The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) slowed a bit, down from 57.1 in February to 55.5 in March. Despite the lower figure, new orders and production growth continued to grow relatively strongly, with overall manufacturing activity improved from January’s winter storms. A similar recovery was seen in regional data from the Kansas City Federal Reserve Bank, mirroring the findings from New York and Philadelphia the week before. Still, not everyone has seen improvements yet. The Richmond Federal Reserve reported lackluster growth in sales and output, with weather continuing to “wreak havoc” for many manufacturers. In addition, while new durable goods orders were up a strong 2.2 percent in February, sales growth increased at the less-than-robust rate of just 0.2 percent when transportation orders were excluded.

On the consumer front, the data were mostly positive, but with some caveats. Personal income and spending both increased 0.3 percent in February, with each rising 3.0 percent over the past 12 months. This was a decent pace, but increased purchases of nondurable goods and services mainly fueled spending growth in February. Durable goods spending declined for the third month in a row. In terms of consumer confidence, the two reports out last week were mixed. The Conference Board’s measure of consumer sentiment reached a six-year high; yet, labor market worries dampened enthusiasm for the current environment. Likewise, the University of Michigan and Thomson Reuters reported that consumer sentiment edged lower in March, with employment and income growth also weighing on respondents’ minds. In both surveys, however, Americans are more confident today than in the fall during the government shutdown.

Looking overseas, Markit released preliminary manufacturing PMI data for China and the Eurozone. Chinese manufacturing activity has now contracted for three consecutive months, with March’s pace being the slowest since July. The data mirror other recent indicators, including industrial production, fixed asset investment and retail sales, which have slowed. As such, they all suggest that real GDP might fall below the 7.7 percent rate in the fourth quarter. (First-quarter real GDP for China will be released on April 15.) Meanwhile, European manufacturers have seen expanding activity levels for nine straight months, even as Eurozone PMI values eased slightly in March. New orders and production remain strong in Germany, and, of note, French manufacturers were positive in their sentiment for the first time since June 2011.

This week, the focus will be on the March jobs numbers, which will come out on Friday. The consensus expectation is for nonfarm payroll growth of around 190,000, with manufacturers hiring somewhere near the 12,000 average experienced in the sector since August. In addition, the Institute for Supply Management (ISM) is expected to show a slight rebound in manufacturing PMI activity in its March data, up from 53.2 in February. Other highlights this week include the latest data on construction spending, factory orders and international trade.

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

gdp forecast - mar2014

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Personal Income and Spending Both Rose Modestly in February

The Bureau of Economic Analysis said that personal income and spending both increased by 0.3 percent in February, extending the modest gains of January. After weather-related softness in December, the data have been more favorable in the first two months of 2014. On a year-over-year basis, each of these measures has risen 3.0 percent. This compares to personal income growth of 2.9 percent in 2013, with a 3.2 percent pace for personal spending last year. (If you were to omit December, which was an outlier month due to the fiscal cliff the year before, personal income growth would have also been 3.2 percent.)

The increase in spending in February stemmed from both nondurable goods and services, both of which increased 0.3 percent for the month. Durable goods purchases fell for the third straight month, down 0.2 percent in February. It is likely that poor weather conditions negatively impacted these figures, with other releases showing weak spending for automobiles and other items from December to February.

Meanwhile, wages and salaries were up 0.2 percent in February, rising 3.1 percent over the past 12 months. For manufacturers, there was some softness on the wage front, likely due to weather-related slowdowns. Indeed, manufacturing wages and salaries have fallen from $758.0 billion in November to $754.2 billion in February. Prior to that, compensation had been rising, particularly as activity had picked up. For instance, wages in the sector averaged $707.1 billion, $735.4 billion, and $747.8 billion in 2011, 2012, and 2013, respectively.

The savings rate edged slightly higher, up from 4.2 percent in January to 4.3 percent in February. Still, we have generally seen this rate decelerate over the past year. The savings rate dropped from an average of 5.3 percent through the first 11 months of 2012 to 4.5 percent in 2013.

Overall inflationary pressures remain minimal, with prices for core personal consumption expenditures (PCE) up just 0.9 percent year-over-year, down from 1.2 percent last month. Energy prices had risen in December and January on increased home-heating costs, but these eased a bit in February, down 0.4 percent.  Inflation remains below the Federal Reserve’s 2 percent target rate, which frees the Fed up to pursue its highly accommodative policies. If anything, there are some who argue that disinflationary pressures might be a concern, but that is less true in the U.S. than it is in Europe.

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

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Personal Income and Spending Bounced Back in January, but Goods Purchases Were Lower

The Bureau of Economic Analysis said that personal income and spending bounced back in January after weaknesses seen in December. Consumer spending rose 0.4 percent in January after increasing just 0.1 percent the month before. Year-over-year growth in personal spending also edged higher, up from 3.2 percent to 3.45 percent, its fastest pace since December 2012. Nonetheless, the news was not as good for manufacturers as the headline figure might suggest.

The increase in spending in January stemmed entirely from services, up 0.9 percent for the month. In contrast, durable and nondurable goods spending were both lower, down 0.3 percent and 0.7 percent, respectively. It was the second consecutive monthly decline for durable goods spending, which declined 2.6 percent in December. It is likely that poor weather conditions negatively impacted these figures, with other releases showing weak spending for automobiles and other items over these two months.

Meanwhile, personal income increased 0.3 percent in January, an improvement from being unchanged in December. Total wage and salary disbursements were up 0.2 percent for the month, or 3.6 percent over the past 12 months. For manufacturers, wages and salaries have been essentially flat over the past three months, hovering around $758 billion. The figure has gradually moved higher over the longer-term, however. Six months ago, wages and salaries in the sector were $742.5 billion, and they have moved up from averages of $707.1 billion and $735.4 billion in 2011 and 2012, respectively.

The savings rate remained at 4.3 percent in January for the second straight month, and we have generally seen this rate decelerate over much of the past year. 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.

Overall inflationary pressures remain minimal, with prices for core personal consumption expenditures (PCE) up just 1.1 percent year-over-year. Energy prices were up 0.4 percent in January, or 3.5 percent over the past 12 months, as more Americans needed to heat their homes due to cold weather conditions. Nonetheless, inflation remains below the Federal Reserve’s 2 percent target rate, which frees the Fed up to pursue its highly accommodative policies.

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

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Monday Economic Report – February 3, 2014

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

While equity markets around the world continue to worry about the emerging markets, the economic news in the United States has been more encouraging. In particular, we learned that real GDP grew at a relatively strong pace in the fourth quarter, up 3.2 percent. Robust growth in consumer spending and exports boosted the nation’s output, with the main drag being federal government spending. Note that this was the quarter that included the partial government shutdown, which might explain part of that decrease, with defense and nondefense government spending lower. Yet, the key takeaway from this data was the strength of the U.S. economy as we ended 2013, with real GDP increasing 3.7 percent at the annual rate in the second half of the year.

At the same time, it is worth noting that real GDP rose a more-disappointing 1.9 percent for 2013 as a whole, below the 2.8 percent figure seen in 2012. Likewise, personal income growth also decelerated, from 4.2 percent in 2012 to 2.8 percent in 2013. Personal incomes remained flat in general for the month. Nonetheless, total wages and salaries in the manufacturing sector increased from $760.9 billion in November to $763.6 billion in December, with annual growth of 1.9 percent. Meanwhile, personal spending in December rose 0.4 percent, extending the 0.6 percent gain observed in November. While the monthly increase resulted from a huge jump in nondurable goods spending, the annual data reflected larger increases for durable goods (7.1 percent versus 2.1 percent). In other developments, consumer confidence appears to have rebounded after falling during the government shutdown, as reflected in both Conference Board and University of Michigan reports.

Some of the other reports for the manufacturing sector were mixed. Regional sentiment surveys, such as those from the Dallas and Richmond Federal Reserve Banks, continue to show expanding levels of sales and production. Moreover, respondents remain mostly upbeat in their outlook for the next six months. In contrast, new durable goods orders dipped 4.3 percent in December. Moreover, even excluding the highly-volatile transportation sector, new orders would have fallen 1.6 percent, suggesting broader weaknesses beyond aircraft and motor vehicles. Shipments of durable goods were also lower. Weather could have been a factor, as well as the timing of some orders due to the holidays. As such, it will be interesting to see if upcoming data reveals the December data as an outlier.

For its part, the Federal Open Market Committee (FOMC) of the Federal Reserve stressed the positive, noting that “growth in economic activity picked up in recent quarters.” As expected, the FOMC further reduced its purchases of long-term and mortgage-backed securities from $75 billion each month to $65 billion. It had begun to taper these asset purchases at its December meeting. This marked the last meeting chaired by Ben Bernanke, as Janet Yellen became the chair of the Federal Reserve Board on February 1. The FOMC will continue to maintain its “highly accommodative” monetary policies for the foreseeable future, with short-term interest rates remaining effectively zero beyond when the economy reaches 6.5 percent. One notable element in the FOMC statement was that none of the participants dissented this time around. While the committee does have new participants for 2014, this was the first statement to not have a dissention since the June 2011 meeting.

This week, the focus will return to the labor market with the release of January employment numbers on Friday. Following the lackluster nonfarm payroll growth of December, the consensus is for 175,000 net new workers to have been added in January. For manufacturers, we will be looking to see if we can extend the strong hiring gains observed from August to December, adding an average of 16,000 jobs per month during that five-month period. Another highlight will be the December trade data, which will allow us to see if manufacturers were able to improve upon the mostly discouraging export figures that we have seen so far for 2013. Other economic indicators to watch include new data on construction spending, consumer credit, the Institute for Supply Management’s purchasing managers’ index, new factory orders and productivity.

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

annual real gdp growth - feb2014

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Personal Spending Rose Modestly in December, But Incomes Were Flat

Personal incomes were unchanged in December, according to the latest data from the Bureau of Economic Analysis. For the fourth quarter, incomes were up just marginally, increasing a very modest 0.1 percent. For the year of 2013 as a whole, personal incomes rose 2.8 percent, below the 4.2 percent gain observed in 2012.

For manufacturers, total wages and salaries increased from $760.9 billion in November to $763.6 billion in December. Average manufacturing wages and salaries for 2013 were $749.3 billion, up 1.9 percent from $735.4 billion in 2012.

Meanwhile, personal spending rose 0.4 percent in December, extending the 0.6 percent increase seen in November. Overall, consumers spent 1.1 percent more in the fourth quarter, with a gain of 2.0 percent for all of 2013. This was slightly below the 2.2 percent increase observed in 2012.

December’s higher personal spending figure stemmed largely from a significant jump in nondurable goods activity, up 1.5 percent for the month. In contrast, personal durable goods spending declined 1.8 percent, offsetting the 1.8 percent jump in November. Looking at the entire year, however, durable goods spending growth outpaced that for nondurable goods, 7.1 percent to 2.1 percent.

With personal incomes flat for the month, the savings rate fell from 4.3 percent in November to 3.9 percent in December. This was the lowest rate in 11 months, and it was the third consecutive monthly decrease, down from 5.1 percent in September.

The other notable item to report from this release was the personal consumption expenditure (PCE) data, which looks at consumer inflation. The Federal Reserve prefers this measure when looking at pricing pressures. Year-over-year growth in the PCE has edged somewhat higher over the past couple months, up from 0.7 percent in October to 0.9 percent in November to 1.1 percent in December. Yet, this still suggests that inflation remains largely in-check, at least for now. Core inflation — which excludes food and energy — has risen just 1.2 percent over the past year, which remains well below the Fed’s stated target of 2 percent.

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

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Monday Economic Report – January 6, 2014

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

The incoming data show that manufacturers ended 2013 on a high note. Despite a slight decline in December, the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) has reflected expanding manufacturing activity for seven consecutive months. Moreover, the manufacturing PMI data averaged 56.3 in the second half of 2013, a nice improvement from the 51.5 average during the first half of the year. As such, it appears that manufacturing activity has rebounded in the past few months from notable weaknesses in the spring, helping to buoy the prospects for continued growth in 2014. For instance, the real strength in the ISM report has been the new orders and production indices, both of which have exceeded 60.0—signifying healthy gains—for at least five straight months.

In a report released after Christmas, the Census Bureau reported that new durable goods orders increased 3.5 percent in November (or 1.2 percent, if you exclude the highly volatile transportation sector). From November 2012 to November 2013, sales of durable goods products rose at a strong 10.9 percent pace, and they are at their second-highest level since the end of 2007. Such findings are encouraging. At the same time, manufacturers in the Dallas and Richmond Federal Reserve Bank districts remain mostly upbeat about future activity for the sector. This was true even with some easing in new orders in both regions. More than half of the respondents to the Texas Manufacturing Outlook Survey expect increased new orders in the next six months.

Manufacturing construction spending rose 1.2 percent from $53.93 billion in October at the annual rate to $54.58 billion in November. This was the fifth straight month that construction spending has risen for the sector, increasing from $43.34 billion in June, the lowest point of the year. Over a longer time horizon, manufacturers have steadily upped their construction investment dollars after bottoming out in January 2011 at an annualized $28.84 billion pace. Overall construction activity increased 5.9 percent on a year-over-year basis, boosted significantly by the rebounding housing market. Private, residential construction activity has grown 16.6 percent since November 2012. Private, nonresidential construction spending has been stable, rising a more modest 1.0 percent year-over-year. However, nonresidential construction in the private sector has risen five months in a row, up 8.5 percent in that time frame.

Similarly, we have seen consumer confidence rebound in the latest data after falling during the federal government shutdown. Reports from both the Conference Board and the University of Michigan observed rising sentiment in December. The Conference Board’s Consumer Confidence Index increased from 72.0 in November to 78.1 in December. While this remains below the recent peak of 82.1 in June (its highest point since January 2008), it is clear that Americans have become more optimistic over the course of 2013, with the index measuring 58.4 in January. Even with these gains, consumers remain somewhat anxious about the economy, particularly with their income and job potential. The Conference Board’s key measure has not exceeded 100 since August 2007.

The Conference Board report does suggest an increased willingness to purchase homes and appliances, with automobile buying intentions improved from the summer. Similarly, personal spending growth has also made gains in the past few months, up 0.4 percent in October and 0.5 percent in November. Much of that growth stemmed from an increase in durable goods expenditures. Consumer spending has increased 3.5 percent over the past 12 months, its fastest pace of 2013 and an improvement from the 2.9 percent year-over-year rate in September.

This week, the primary focus will be the employment report due out on Friday. The consensus estimate is for roughly 200,000 nonfarm payroll jobs added in December, which would be in line with the 204,000 average per month from August to November. Likewise, manufacturers added an average of 16,500 net new workers each month over the same time frame, and they are expected to have continued to make modest hiring gains in December. The other key highlight this week will be new international trade data, which will be released tomorrow. Recent data have suggested a narrowing of the overall trade deficit, and yet, growth in manufactured goods exports has been quite slow. We hope improvements in the global economy will help to increase manufacturers’ overseas sales moving forward.

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

ism pmi - jan2014

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November Personal Spending Increased Modestly Led by Strong Growth in Durable Goods

The Bureau of Economic Analysis said that personal spending growth grew 0.5 percent in November, extending the 0.4 percent gain seen in October. Consumer spending has increased 3.5 percent over the past 12 months, its fastest pace so far in 2013 and an improvement from the 2.9 percent year-over-year rate in September. Nonetheless, it is clear that personal spending growth has decelerated from the 4.1 percent pace average of 2012 to the 3.1 percent average year-to-date in 2013.

Looking specifically at the November data, the growth in personal goods spending stemmed from an increase in durable goods expenditures. Spending on durable goods increased from an annualized $1.282 trillion in October to $1.307 trillion in November. Meanwhile, purchases of nondurable goods declined in the month from $2.667 trillion to $2.657 trillion.

Both durable and nondurable goods spending continue to increase over a longer term. Six months ago (May), for instance, durable and nondurable goods purchases were $1.255 trillion and $2.585 trillion, respectively.

Meanwhile, personal income rebounded in November, rising by 0.2 percent after falling 0.1 percent in November. Much of October’s decrease had been attributable to a sharp falloff in farm proprietors’ income, which was still down in November. But, it was offset by stronger growth in wages and salaries, which increased 0.4 percent for the month. For manufacturers, total wages and salaries rose from $754.3 billion to $759.1 billion. This figure has gradually moved higher. Six months ago, wages and salaries in the sector were $744.8 billion, and they moved steadily higher from the averages of $707.1 billion and $735.4 billion in 2011 and 2012, respectively.

Perhaps disappointingly, the year-over-year pace of personal income continues to decelerate, down from 3.4 percent in October to 2.3 percent in November. In contrast to personal spending, this was the lowest annual pace of the year. Through the first 11 months of 2013, the annual pace has averaged 3.2 percent, down from the 4.2 percent rate experienced in all of 2012.

With personal spending outstripping personal income, the savings rate has fallen in each of the past two months, down from 5.1 percent in September to 4.5 percent in October to 4.2 percent in November.

Overall inflationary pressures remain minimal, with prices for personal consumption expenditures (PCE) unchanged for the second month in a row. The year-over-year rate of PCE growth was just 0.9 percent, and when you exclude food and energy, the annual rate of core PCE growth was 1.1 percent. Much as we have seen in recent consumer and producer price data, inflation remains below the Federal Reserve’s 2 percent target rate, which frees the Fed up to pursue its highly accommodative policies.

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

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Monday Economic Report – December 9, 2013

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

The Federal Reserve Board’s Beige Book, released last week, suggested that the U.S. economy was expanding at a modest to moderate pace nationally. Other data were even more encouraging, including strong numbers for economic growth, manufacturing activity and overall hiring. For instance, the Bureau of Economic Analysis reported that real GDP increased by 3.6 percent during the third quarter, up from its previous estimate of 2.8 percent. This was the fastest pace of growth since the first quarter of 2012. One drawback in the report was that much of the increase stemmed from the restocking of inventories—something that will likely not be replicated in the current quarter. Yet, consumer and business spending also made significant contributions to the economy, with relatively healthy gains for goods exports and improvements in the financial positions of state and local governments.

The stronger domestic and global economy has helped buoy the manufacturing sector, with stronger sales and output seen since the beginning of the third quarter. The Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) has soared to 57.3, its highest point since April 2011. This was the fourth straight month with the new orders index greater than 60.0, indicating very robust growth in sales. More importantly, export orders also had healthy increases, up from 57.0 to 59.5. With manufactured goods exports up only 1.9 percent year-to-date, the fact that our overseas sales were beginning to pick up was welcome news. Overall, the ISM report—while much more optimistic than other sentiment surveys—mirrors the mostly upbeat outlook within the sector. Yet, sample comments also note downside risks associated with government uncertainty—a lingering issue that has dampened demand on and off over the past few years.

Friday’s jobs numbers were another boost for the U.S. economy. Manufacturers added 27,000 net new workers in November, the most in any month since March 2012. Moreover, it appears that businesses have begun to accelerate their hiring in recent months. The average monthly job gain over the past four months (August to November) was 16,500, a definite sign of progress from the average decline of 8,000 in the five months prior to that (March to July). A similar pattern exists for nonfarm payroll workers, with the average over the past four months jumping to 204,000. The unemployment rate fell to 7.0 percent in November, a rate not seen since November 2008. Yet, despite the strong employment gains, hiring plans remain mostly modest at best over the next year, and manufacturers have accounted for just 3.3 percent of the net new job gains over the past 12 months.

Consumers have seen their spirits lifted recently, particularly as we move further away from the government shutdown. Preliminary data from the University of Michigan and Thomson Reuters indicate that consumer confidence has returned to where it was before the budget impasse, even as lingering anxieties persist. (Sentiment remains lower than it was over the summer.) As their attitudes about the economy have improved, Americans have also opened their wallets, albeit somewhat tepidly. Personal spending rose modestly in October, with higher purchases for both durable and nondurable goods. Perhaps more timely, “Cyber Monday” retail sales set a new record, even as overall spending gains have been mixed for the holidays.

Today, we will release the results of the latest NAM/IndustryWeek Survey of Manufacturers. The report captures the mixed nature of the current economic landscape, which is both hopeful and cautious at the same time. The percentage of respondents who were positive about their own company’s outlook continued to edge higher, up from 76.1 percent in September to 78.1 percent in December. Yet, many subcomponents reflected some easing in activity expected over the next year. For example, respondents now anticipate sales growth of 3.0 percent in the next 12 months, down from 3.3 percent in September’s survey. Nonetheless, the report also found that manufacturing production should accelerate over the next two quarters, with the rising stock market and rebounding housing market helping to drive these estimates higher. The NAM/IndustryWeek survey also includes a number of special questions on the Affordable Care Act and the ongoing budget negotiations.

Other economic reports out this week include the latest numbers for job openings, producer prices, retail sales, small business confidence and wholesale trade.

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

contributions to real gdp - dec2013

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Modest Growth in Personal Spending on Goods in October

The Bureau of Economic Analysis said that personal spending growth rose modestly in October. Consumer spending increased 0.3 percent in October, the sixth straight month of gains in purchasing. The year-over-year pace strengthened from 2.6 percent in September to 2.8 percent in October. Still, it is clear that personal spending growth has decelerated from the 4.1 percent pace average of 2012 to the 3.0 percent average year-to-date in 2013.

Looking specifically at the October data, spending was higher for both durable and nondurable goods, up 0.6 percent and 0.3 percent, respectively.

Meanwhile, personal income fell 0.1 percent in October, the first decline since January. To be fair, however, much of that decrease was attributable to a sharp falloff in farm proprietors’ income. Wages and salaries rose 0.1 percent, and for manufacturers, total wages and salaries totaled $749.2 billion in October, up from $745.9 billion in September.  This figure has gradually moved higher, up from averages of $707.1 billion and $735.4 billion in 2011 and 2012, respectively.

The year-over-year pace of personal income has also eased, down from 3.9 percent in September to 3.4 percent in October. Through the first 10 months of the year, the annual pace has averaged 3.3 percent, down from the 4.2 percent rate experienced in all of 2012.

With personal spending outstripping personal income, the savings rate fell from 5.2 percent in September to 4.8 percent in October. Even with the slight decrease, the savings rate has edged higher in general as the year has progressed, with the year-to-date average being 4.6 percent. Nonetheless, the savings rate has generally been lower this year than last, when the saving rate averaged 5.3 percent from January to November 2012. (I omitted December due to accelerated payouts skewing the data in the lead-up to the fiscal cliff deal.)

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

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Monday Economic Report – November 12, 2013

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

The U.S. economy has been increasing a bit faster than expected, with real GDP up a surprisingly strong 2.8 percent in the third quarter. This was higher than consensus estimates of around 2.0 percent. In general, the data observed that many of the second-quarter trends extended into the third quarter, particularly with modest growth in consumer and business spending. In fact, goods spending grew an annualized 4.3 percent in the third quarter, contributing 0.99 percentage points to overall real GDP. Fixed investment was a positive contributor overall, but the largest component was inventory replenishment. Without inventory spending, real GDP would have been closer to the forecasted 2.0 percent. Other positives included stronger growth in exports and improved local and state government performance. While the data pre-dated the government shutdown, reduced federal government spending was once again a drag on growth, something that will continue moving into the fourth quarter.

October’s jobs numbers were also surprisingly strong. It was widely expected that the employment data from the Bureau of Labor Statistics were going to be closer to what ADP had estimated the week before, with roughly 130,000 additional workers added in the month. Instead, nonfarm payrolls increased by 204,000 in October, and when combined with significant revisions to August and September data, the average over the past three months is 201,667. This suggests hiring has picked up more recently in the larger economy, mirroring improvements in other data. However, the unemployment rate edged up slightly from 7.2 percent to 7.3 percent. This corresponded with the participation rate moving up a bit from 63.2 percent to 63.8 percent, suggesting that some workers might be returning to the market.

Manufacturers hired an additional 19,000 workers on net in October, its fastest pace since February. Both durable and nondurable goods firms brought on additional employees, up 12,000 and 7,000, respectively, for the month, and the largest increase occurred in the motor vehicle sector, which added another 5,700 workers. While this was better than recent figures, hiring growth for the sector has been disappointing. On a year-over-year basis, manufacturers have added 55,000 additional workers, or 2.4 percent of the 2.3 million nonfarm payroll workers added over the past 12 months.

Other data released last week also highlighted the recent acceleration in manufacturing activity. The JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) increased from 51.8 in September to 52.1 in October, its fastest pace since May 2011. Stabilization in Asia and Europe has helped to raise the level of new orders and output in many of our key trading partners, with modest growth in October. (For more information on these trends, see the latest Global Manufacturing Economic Update, which was released on Friday.) Increases in manufacturing sales helped lift the Conference Board’s Leading Economic Index (LEI) higher as well. For instance, new manufactured goods orders jumped 1.7 percent in September. Nonetheless, aircraft orders were the main driver of new factory orders, with weaknesses in the broader market.

Meanwhile, consumer confidence continued to fall in preliminary survey data from the University of Michigan and Thomson Reuters. Since reaching a six-year high in July, the confidence measure has fallen from 85.1 to 72.0. The government shutdown dampened overall sentiment, but attitudes were already waning before that. To some extent, the diminished enthusiasm about the current and future economic environment might have impacted Americans’ purchasing decisions. The latest personal spending report suggests individuals might be more hesitant about opening their pocketbooks, with only modest growth in purchases in recent months. Consumer spending fell in the third quarter, down from a year-over-year pace of 3.3 percent in June to 2.7 percent in September. Durable goods spending declined 1.3 percent in September, bringing down the total figure. Interestingly, this slowdown in spending has corresponded with relatively strong personal income growth, up an annualized 4.45 percent in the third quarter. As a result, the savings rate increased to 4.9 percent, its highest level so far in 2013.

This week, the focus will be on price, production and trade data. Prices have been increasing minimally, with core inflation running below 2 percent. That should continue to be true with the release of October consumer and producer pricing data on Thursday and Friday. Improvements in the global economy should lead to better export figures, and manufacturing production should also be up modestly, building on recent gains. Other highlights will be the latest regional manufacturing survey from the New York Federal Reserve Board and new reports on labor productivity and small business optimism.

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

real GDP forecast - nov2013

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