Here is the summary for this week’s Monday Economic Report:
In the first five months of 2013, manufacturing production has been virtually unchanged, according to the Federal Reserve Board, and capacity utilization in the sector edged lower from 76.4 percent in December to 75.8 percent in May. Production among manufacturers increased 0.1 percent in May, or up 1.7 percent year-over-year. The latest NAM/IndustryWeek Survey of Manufacturers predicted that the annual pace of production activity should increase to 2.8 percent by the fourth quarter of 2013. Manufacturing production will need to pick up for that to be true. Manufacturing export numbers have been soft, with higher taxes and across-the-board spending cuts dampening demand.
Regarding the NAM/IndustryWeek survey, manufacturers anticipate sales to increase 2.7 percent on average over the course of the next year. While this is higher than the 2.3 percent growth rate observed three months ago, it is below the 4.3 percent pace of 12 months ago. Larger businesses were more optimistic about sales and their company’s outlook than their small and medium-sized counterparts, with all respondents predicting sluggish hiring growth over the next year. The top concern, cited by 82.2 percent of respondents, was the rising cost of health insurance. The average health insurance premium increase in 2013 was 8.6 percent, with a 13.9 percent jump on average anticipated for 2014. The 2014 numbers suggest just how much uncertainty there is regarding insurance rates, with the perception they will go up significantly. I spoke about this survey and the general state of manufacturing on CNBC’s “Squawk Box” last Tuesday. (continue reading…)