Tag: Richmond Fed

Monday Economic Report – September 29, 2014

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

The U.S. economy grew an annualized 4.6 percent in the second quarter of this year, its fastest pace since the fourth quarter of 2011. Consumer and business spending were the big bright spots in the real GDP report, with strong rebounds after softness in the first quarter. This latest revision reflected improved nonresidential fixed investment and goods exports data relative to prior estimates. At the same time, it is hard to forget that real GDP fell by 2.1 percent in the first quarter, with growth in the first half of 2014 expanding by a frustratingly slow 1.2 percent. Moving forward, manufacturers remain mostly upbeat. For instance, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) held firm at 57.9, its fastest pace since May 2010.

I estimate real GDP growth of 3.3 percent for the third quarter, which ends this week. Nonetheless, there are a number of downside risks, and business leaders and the public remain tentative in their optimism.

Along those lines, regional surveys from the Kansas City and Richmond Federal Reserve Banks continued to show expanding activity levels in their districts. The Richmond release found that activity has now grown for six straight months since winter-related contractions earlier in the year. It also reflected an uptick in production and demand, with the pace of hiring accelerating to its highest level since December 2010. All of this was encouraging. In the Kansas City district, manufacturers remained mostly positive, with more than half of respondents expecting increased production and shipments in the next six months. Among the issues cited in the Kansas City survey, manufacturers noted persistent challenges in attracting and retaining skilled workers. Other sample comments mentioned rising pricing pressures, both for wages and raw materials.

Turning to the global economy, the HSBC Flash China Manufacturing PMI edged slightly higher, up from 50.2 in August to 50.5 in September. This marked the fourth consecutive month with expanding manufacturing activity, improving from contractions in the first five months of the year. Yet, even with some signs of stabilization in China in recent data, the country is expected to continue to decelerate in its growth rates moving forward, something that it continues to grapple with. Similarly, the European Central Bank has struggled to cope with slow economic and income growth in the Eurozone, with persistent worries about deflation. Indeed, the Markit Flash Eurozone Manufacturing PMI eased yet again, down from 50.7 to 50.5. This was the lowest level of growth since July 2013, the first month that the Eurozone emerged from its deep two-year recession.

Meanwhile, housing data released last week were mixed. New home sales rose sharply, up from an annualized 427,000 in July to 504,000 in August. This was the highest level in more than six years, and the pace of sales in August starkly contrasts with what we have seen so far in 2014. This makes it likely that September figures will pull back a little, but the trend line remains promising. In contrast, existing home sales decreased 1.8 percent in August, which was disappointing given recent improvements. It is likely that August’s decline was the result of a strong July reading, with some easing probably inevitable. Moving forward, the expectation is that existing home sales should move higher, continuing a longer-run trend in the data since March.

This week, the focus will be on jobs. After a disappointing employment report in August, we anticipate better news in September. I would not be surprised if the zero jobs figure in August for manufacturing was revised higher, and I continue to expect manufacturing jobs gains to revert to an average of 12,500 to 15,000 per month for the rest of the year. Nonfarm payrolls should once again exceed 200,000 in September, an improvement from the 142,000 figure in August (which is also likely to get revised upward). Other highlights this week include the latest data on construction spending, factory orders, international trade, personal income and manufacturing activity in the Dallas Federal Reserve district.

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

real GDP forecast - sept2014

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Richmond Fed: Manufacturing Activity Continued to Expand at Fastest Pace in Over 3 Years

The Richmond Federal Reserve Bank said that manufacturing activity continued to expand at its fastest pace since March 2011. The composite index of general business conditions rose from 12 in August to 14 in September. It was the sixth consecutive monthly expansion since the winter-related contractions in both February and March. Indeed, much like other regional surveys, these data show an uptick in demand and production for manufacturers recently, with a mostly upbeat assessment for the coming months.

Looking specifically at current activity, manufacturing leaders in the Richmond Fed district noted increased paces for many of the key measures. This included new orders (up from 13 to 14), shipments (up from 10 to 11), the average workweek (up from 8 to 10) and the number of employees (up from 11 to 17). Regarding hiring, that measure was the highest level observed since December 2010, suggesting that manufacturers in the region are adding new workers at an accelerated pace. The only measure to decelerate slightly in the month was capacity utilization (down from 17 to 13), but it continues to expand at a decent rate.

Manufacturers in the region remain relatively optimistic in their expectations for the next six months, albeit marginally less positive than the month before. Indices for a number of indicators shifted somewhat lower in September but still indicate strong growth ahead. This includes new orders (down from 47 to 37), shipments (down from 43 to 41), capacity utilization (down from 35 to 26), hiring (down from 18 to 17) and the workweek (unchanged at 10). On the positive side, capital expenditures picked up the pace, with the index increasing from 27 to 38. Wages (up from 28 to 35) also accelerated convincingly.

Inflationary pressures picked up once again in September, bucking the trends seen in national pricing data.  Manufacturers in the region said that prices paid for raw materials grew 2.10 percent at the annual rate in September, up from 1.39 percent in August. Yet, looking ahead six months, respondents expect input costs to increase an annualized 2.00 percent, down from 2.05 percent the month before. This suggests that businesses anticipate modest gains in input prices over the course over the next few months, mostly in-line with Federal Reserve projections.

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

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Monday Economic Report – September 2, 2014

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

Manufacturers continue to report improved activity in August. Last week, the Dallas, Kansas City and Richmond Federal Reserve Banks all noted expanding levels of new orders and production for the month, mirroring releases from the New York and Philadelphia Federal Reserve Banks in the prior weeks. These surveys reflect rebounds from earlier in the year, and perhaps more importantly, they suggest a mostly upbeat assessment in demand, output, hiring and capital spending over the next six months. At the same time, the Dallas and Kansas City studies showed some easing in growth rates in August, with the latter indicating that hiring had turned negative for the month. Exports also contracted in the Kansas City district, showing persistent international sales weaknesses in that region. The data illustrate that, even where we have seen progress, there are often some nagging challenges beneath the surface.

This same observation could be made about much of the other data released last week, too. For instance, new durable goods orders soared in July, up a whopping 22.6 percent. This represented an all-time high for the data series, but it was also largely the result of a jump in nondefense aircraft sales. Commercial airplane orders are choppy, with sales usually announced in batches. New durable goods orders have improved from earlier in the year. Outside of transportation, the manufacturing sector was weak in July. New durable goods orders excluding transportation fell 0.8 percent for the month. This suggests that the broader market for manufacturers was soft in July despite the sky-high headline figure.

Along those lines, the Conference Board reported that consumer confidence rose to its highest point since October 2007. This increase stemmed from improvements in views about the current economic environment. Yet, the Conference Board’s figures also suggested some lingering worries about employment and income growth. The University of Michigan and Thomson Reuters’ report on consumer sentiment seems to focus even more on these anxieties. Even with a marginal increase in the August confidence measure, the University of Michigan data have not changed much this year, and respondents have had a diminished view of future growth over the past few months, not unlike what was seen in the Conference Board data. Geopolitical worries might be playing into these doubts. Either way, the confidence reports mirror other indicators, which show that consumers are cautious right now. Personal spending in July declined for the first time since January, consistent with other data showing flat retail sales.

Despite some softness in July, personal spending has increased at an annualized 4.1 percent over the past six months. Indeed, consumer and business spending were strengths during the second quarter, according to the latest revision of real GDP growth. The U.S. economy grew 4.2 percent at the annual rate during the second quarter, slightly better than the 4.0 percent original estimate and reflecting a rebound from the 2.1 percent decline in the first quarter. The biggest disappointment in the second quarter continued to be international trade figures, with net exports serving as a drag on growth. Moving forward, I estimate real GDP growth of roughly 3.0 percent during the second half of 2014. A number of risks abound, and business leaders and consumers remain tentative. If the first half of this year has taught us anything, it is an optimistic recovery can still be a fragile one.

This week, we will get additional insights regarding the health of the manufacturing sector. This morning, the Institute for Supply Management will release its August Purchasing Managers’ Index data for the sector. The ISM report found strong gains in demand, output and employment in July, and the August survey is expected to show another pickup in activity. Moreover, the Bureau of Labor Statistics will publish new jobs numbers on Friday. Manufacturers have added 15,000 workers on average each month since August 2013, with a 22,000 average from May to July of this year. Look for continued hiring growth for the sector in the August numbers that are at least consistent with the average of the past year. Other highlights this week include the latest data on construction spending, factory orders, international trade and productivity.

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

personal spending - sept2014

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Richmond Fed: Manufacturing Activity Expanded at Fastest Pace in Three Years

The Richmond Federal Reserve Bank said that manufacturing activity expanded at its fastest pace since March 2011 in August. The composite index of general business conditions rose from 7 in July to 12 in August, marking the fifth consecutive monthly expansion after winter-related contractions in both February and March. Indeed, much like other regional surveys, these data show an uptick in demand and production for manufacturers this summer, with a mostly upbeat assessment for the coming months.

Looking specifically at current activity, manufacturing leaders in the Richmond Fed district noted increased paces for many of the key measures. This included new orders (up from 5 to 13), shipments (up from 3 to 10), capacity utilization (up from 4 to 17) and the average workweek (up from 3 to 8). The index for employment (down from 13 to 11) edged slightly lower, but it still indicated decent growth in hiring and improvement from earlier this year. (Hiring growth was flat as recently as February.)

Enhanced perceptions about the current economic environment also carried through to better expectations about the future. The forward-looking indices for manufacturing activity were mostly higher, and each suggested relative strength over the next six months. For instance, the expected new orders variable rose from 34 to 47, its highest point since December 2010. Manufacturers also planned to expand employment (down from 19 to 18) and invest in more capital (up from 19 to 27), even though the former’s pace eased marginally for the month.

Inflationary pressures decelerated somewhat in August after increasing in July.  Manufacturers in the region said that prices paid for raw materials grew 1.39 percent at the annual rate in August, down from 1.99 percent in July. Yet, looking ahead six months, respondents expect input costs to increase an annualized 2.05 percent, up from 1.89 percent the month before. This suggests that businesses anticipate modest gains in input prices over the course of the second half of 2014, mostly in-line with Federal Reserve projections.

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

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Monday Economic Report – July 28, 2014

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

The International Monetary Fund (IMF) released its latest World Economic Outlook last week. The report reflected slower growth rates in the United States and elsewhere for 2014 mostly because of disappointing figures during the first half of the year. The IMF now predicts that U.S. real GDP will grow 1.7 percent in 2014, down from the 2.8 percent forecast in April. Much of this downgrade stemmed from the dismal 2.9 percent decline in real GDP in the first quarter, with output contracting for the first time in three years. At the same time, the manufacturing sector provided a positive contribution to growth in the first quarter, according to new data, despite bleakness in other areas. Fortunately, manufacturers are more upbeat about activity during the second half of this year and for next year. The IMF’s outlook for 2015 is for real GDP growth of 3.0 percent in the United States, which is in line with other predictions.

News regarding manufacturing activity was mostly positive last week, with surveys from the Kansas City and Richmond Federal Reserve Banks both reflecting a pickup in shipments and employment in July. New orders continued to grow at a moderate pace in each region, and respondents were mostly upbeat about sales and production over the next six months. Nonetheless, raw material costs have accelerated a bit in the Richmond district, and new export orders have contracted in eight of the past 12 months in the Kansas City district. Meanwhile, new durable goods orders rebounded in June, with year-to-date growth at a reasonably healthy rate of 4.4 percent. This indicates that the sector has recovered for the most part from winter-related softness, even if some components, such as motor vehicle sales, were lower for the month. Similarly, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) reflected relatively strong growth in sales and output for the sector despite some easing in the headline number in July.

Overseas, the data indicate that the Chinese economy has continued to stabilize from weakness in the first five months of the year. The HSBC Flash China Manufacturing PMI expanded for the second straight month in July, with the pace of activity up for new orders, exports and output. The sales pace was the fastest since January 2011, suggesting that recent measures taken by the Chinese government to stimulate growth have had a positive impact. Likewise, Japanese manufacturers also reported expanding levels of sentiment for two consecutive months, but activity decelerated overall and output stagnated. Export sales from Japan, on the other hand, grew. In other news, the European manufacturing sector made marginal progress in July, particularly for production and exports, and the Eurozone has now expanded for 13 straight months. Yet, growth varied from country to country. For instance, German manufacturing activity picked up in July, while the French economy continued to contract.

The other highlights last week centered on housing and pricing. The housing market remains weaker than we would like, as illustrated by the sharp drop in new home sales in June. Still, the June figure was consistent with the annual paces in March and April, with May’s sales numbers appearing to be an outlier. With the slower pace of sales, inventories of homes have increased. In contrast, existing home sales improved for the third straight month, with some progress in the second quarter relative to the softer first quarter. Even in the existing home sales release, however, there were some discouraging findings, including the fact that sales remain below where they were last year and that first-time homebuyers are still having difficulties making purchases. Meanwhile, on the inflation front, the consumer price index increased in June, led by higher gasoline costs. Yet, pricing pressures remain mostly in check, with core inflation up 1.9 percent over the past 12 months.

This week, the focus will be on second-quarter GDP and jobs. The expectation is that output will rebound from the drop in the first quarter, with consensus forecasts ranging from 2.5 percent to 3.5 percent growth. My view is that real GDP in the second quarter should exceed 3.0 percent. Regarding hiring, manufacturers have added, on average, more than 12,500 each month since August, and I would anticipate seeing a comparable figure for July. Nonfarm payrolls should increase by at least the roughly 230,000 average so far in 2014. Other items to look for this week include manufacturing survey results from the Dallas Federal Reserve Bank and the latest numbers for construction spending, consumer sentiment, employment costs and personal income and spending.

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

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Richmond Fed: Manufacturing Activity Expanding at a Modest Pace

The Richmond Federal Reserve Bank said that manufacturing activity grew at a modest pace, expanding for the fourth straight month. The composite index of general business conditions edged slightly higher, up from 4 in June to 7 in July. Note that historical data in the Richmond Fed survey were revised in this edition to reflect new seasonal adjustments.

Despite the improved top-line figure, the underlying data were largely mixed. The biggest positive was hiring, with the employment index up from 4 to 13. This was the fastest pace of hiring growth since December, which was encouraging. Wage (up from 12 to 16) and shipments (up from 2 to 3) were also higher. Yet, new orders (5) expanded at the same pace, and both capacity utilization (down from 7 to 4) and the average workweek (down from 5 to 3) decelerated somewhat for the month.

Still, manufacturers in the Richmond Fed’s district were mostly upbeat about the next six months, with forward-looking measures increasing in July for many indicators. For instance, new orders (up from 27 to 34), shipments (up from 24 to 36), capacity utilization (up from 18 to 29), employment (up from 12 to 19) and capital expenditures (up from 18 to 19) were all higher, with each suggesting relatively healthy paces of growth.

Inflationary pressures have picked up a bit for the month, but remain mostly in-check. Manufacturers in the region said that prices paid for raw materials grew 1.99 percent at the annual rate in July, up from 1.47 percent in June. Looking ahead six months, respondents expect input costs to increase an annualized 1.89 percent, up only marginally from 1.84 percent the month before.

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

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Monday Economic Report – June 2, 2014

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

The U.S. economy contracted for the first time in three years in the first quarter of 2014. Real GDP fell 1.0 percent in the quarter, a fairly substantial revision from the earlier estimate of a gain of 0.1 percent. Much of the storyline behind these figures was the same, with consumer spending on services being the only real bright spot. Purchases of durable and nondurable goods were positive, but weather-related challenges dampened both. Weaknesses in business spending for equipment and structures, residential housing investments and reduced goods exports were all major drags on growth.

The bulk of the downward revision stemmed from lower inventory replenishment. Ironically, that could lead to more inventory spending in the second quarter with stocks running lower. In addition, other figures also point to a rebound in activity during the spring months, with my forecast for second-quarter real GDP at 3.8 percent. Still, U.S. and global growth have started off 2014 much slower than anticipated, particularly when averaging together the first and second quarters. For the year, we now expect growth of 2.3 percent, which would indicate a slight downgrade from the more optimistic outlook predicted coming out of the strong momentum during the second half of last year.

The spring rebound in the manufacturing sector can be seen in other data released last week as well, albeit with some mixed news overall. For instance, new durable goods orders rose 0.8 percent in April, building on strong growth in February and March. Nonetheless, excluding transportation, new durable goods orders were up less robustly, suggesting some broader weaknesses beyond the headline monthly figure. Moreover, new durable goods shipments declined 0.2 percent in April, even as the longer-term trend remains positive.

At the same time, regional Federal Reserve Bank surveys show a similar recovery for manufacturers, but also some easing in the latest data. Manufacturing activity in the Dallas Federal Reserve district has now expanded for 12 straight months, but the pace of growth for new orders, production, capacity and employment eased in May. The Richmond Federal Reserve’s report also observed a deceleration in sales growth; however, it also noted a pickup in shipments and hiring. Perceptions about the current business outlook were unchanged, even as conditions had improved from winter weather earlier in the year. Looking ahead six months, respondents in both Dallas and Richmond remain mostly upbeat, even if this enthusiasm was a bit weaker in May.

The two surveys also indicated a rise in pricing pressure expectations, consistent with other reports showing some higher raw material costs. Indeed, prices for personal consumption expenditures have risen 1.6 percent year-over-year, up from 0.9 percent in February and 1.1 percent in March. April’s increase stemmed largely from higher energy prices, with food costs also up modestly (but at a slower pace than the month before).

Speaking of consumer spending, Americans decreased their purchases by 0.1 percent in April following two months of healthy increases. Year-to-date, personal spending has grown 1.6 percent, with purchases up 4.3 percent over the past 12 months. Meanwhile, the two consumer confidence measures—one from the Conference Board and the other from the University of Michigan and Thomson Reuters—moved in opposite directions in May, even as they continue to reflect rising sentiment over the past few months, particularly since the government shutdown.

This week, the focus will be on jobs and trade. We will get new employment numbers for May on Friday, which we hope will build on April’s strong figures. Manufacturers have averaged just more than 13,000 workers per month since August, and the expectation is for job growth in the sector around 10,000 or so in May. The consensus forecast is for 215,000 additional nonfarm payroll workers for the month, suggesting decent hiring. On the international front, we will learn if manufactured goods exports can improve from the rather disappointing rates so far in 2014, up just 1.1 percent in the first quarter of this year relative to the same three months in 2013. Other highlights include new data on construction, factory orders, productivity and Purchasing Managers’ Index figures from the Institute for Supply Management.

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

percent change in real GDP - jun2014

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Richmond Fed: Pace of Growth was Unchanged in May for Manufacturers

The Richmond Federal Reserve Bank reported an unchanged pace of growth in May. The composite index of general business conditions remained the same in May (7) as it was in April. Nonetheless, the data also show that the sector continues to expand modestly following weather-related declines in both February and March.

The pace of new orders eased for the month (down from 10 to 3), but sales expanded for the second straight month. Meanwhile, shipments (up from 6 to 10) and employment (up from 4 to 10) accelerated in May. The latter was at its fastest pace since December, and it was a nice improvement from the stagnant hiring rates of February and March. Still, the average workweek edged up only slightly (up from 2 to 3), with wages rising sharply (up from 6 to 22).

While manufacturers in the Richmond Fed district remain mostly positive about the next six months, that optimism has eased somewhat over the past two months. For instance, the forward-looking shipments index has fallen from 31 in March to 22 in April to 17 in May. Other measures followed suit, including slightly decelerated but still strong anticipated growth rates for sales, capacity utilization, and employment. In contrast, capital spending plans rose slightly, up from 16 in April to 19 in May.

Pricing pressures remained in-check for the most part, but were higher in May. Raw material prices increased 1.36 percent at the annual rate in May, up from 0.78 percent in April. Looking ahead six months, respondents anticipate input prices rising an annualized 1.69 percent, up from 1.32 percent the month before.

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

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Monday Economic Report – April 28, 2014

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

Manufacturers contributed $2.14 trillion in value-added output in the fourth quarter of 2013, according to new real GDP data by industry from the Bureau of Economic Analysis. For the first time, the government is releasing this information on a quarterly basis, allowing us to get a better sense of which sectors have had the largest impacts to real GDP in any given quarter. After bottoming out at $1.69 trillion in the second quarter of 2009, manufacturers’ value-added output has bounced back. Overall, the manufacturing sector makes up 12.5 percent of real GDP and has made outsized contributions to output since the end of the recession. For instance, in 2013, manufacturers added 0.40 percentage points to the 1.9 percent growth rate in real GDP, or just more than 21 percent.

This week, we will get our first glimpse of real GDP growth for the first quarter of 2014. Winter storms and weak export sales are expected to take a toll, with consensus expectations around 1.5 percent. With weather-related softness abating as temperatures have started to warm up, we have seen a rebound in activity in many key manufacturing indicators in March, potentially boosting economic growth in the first quarter. I estimate real GDP growth of around 1.8 percent.

Several figures released last week support the notion that manufacturing has begun to recover from softness earlier in the year. For instance, the Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) reported that production in April was at its highest level since March 2011, with relatively strong growth in new orders. This was true despite some slight easing in the overall PMI figure. Likewise, manufacturing surveys from the Kansas City and Richmond Federal Reserve Banks also found rebounds in activity, and respondents remain mostly optimistic about the next six months. In the Kansas City Federal Reserve report, nearly half of respondents anticipate increased orders, shipments and production in the coming months, and more than one-third plan to bring on new workers and to invest in more capital spending. New durable goods orders for March were also quite positive across the board, rising 2.6 percent for the month and a healthy 9.1 percent year-over-year.

Such news has helped to lift spirits. The Conference Board’s Leading Economic Index (LEI) increased 0.8 percent in March, extending February’s 0.5 percent gain. This was the fastest pace since November, with better production data boosting the increase. In general, the index’s findings were supportive of a growing economy over the coming months. Americans, by and large, have also become more confident. The University of Michigan and Thomson Reuters reported that consumer sentiment rose to its highest point since July 2013, with its headline index rising from 80.0 in March to 84.1 in April. As such, it indicates that Americans’ attitudes have recovered slowly after falling during the government shutdown.

Still, it has not been all good news on the economic front. One area of concern was growth in manufacturing activity in China, which has now contracted for four straight months. Yet, the pace of the decline slowed, with the HSBC Flash China Manufacturing PMI up from 48.0 in March to 48.3 in April. The data largely mirrored the recent deceleration in other economic indicators, including China’s real GDP falling from an annualized 7.7 percent in the fourth quarter of 2013 to 7.4 percent in the first quarter of 2014. Despite the weaknesses, one could put a positive spin on the slightly better—but still contracting—levels of new orders and output. On the other hand, exports have now contracted in four of the past six months, negatively impacting overall manufacturing sentiment.

The other worry was sluggish housing growth. New single-family home sales plummeted, down 14.5 percent in March and off 13.3 percent year-over-year. Higher interest rates are likely a factor. The Mortgage Bankers Association reported significant declines in mortgage applications over the past year, largely for refinancings. At the same time, the number of new mortgages has also stalled. With new home sales down, the supply of new homes for sale has soared from 4.8 months in January to 6.0 months in March. Meanwhile, existing home sales have been soft all year.

In addition to real GDP, other economic highlights this week include new manufacturing surveys from the Institute for Supply Management and the Dallas Federal Reserve Bank and the latest data on construction spending, factory orders and personal income and spending. The Federal Reserve is expected to continue tapering, reducing its monthly purchases of long-term and mortgage-backed securities from $55 billion to $45 billion. On Friday, we will get new jobs numbers for April, with modest gains in manufacturing employment expected and nonfarm payrolls expanding around 200,000.

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

contributions to real GDP - apr2014

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Manufacturers Cite a Rebound in Activity in Richmond Fed District

The Richmond Federal Reserve Bank said that manufacturing activity in its District rebounded in April after contracting in both February and March. The composite index increased from -7 in March to 7 in April as manufacturers have begun to recover from weather-related weaknesses. The pace of new orders (up from -9 to 10) and shipments (up from -9 to 6) both picked up for the month, helping to lead the overall index higher. Capacity utilization returned to growth, but just barely (up from -14 to 1), suggesting some stabilization.

With that said, the index for the average workweek was unchanged (2), and employment growth remained weak, but fortunately positive (up from zero to 4).

Looking forward six months, manufacturers in the region remained mostly upbeat about the future, but that sentiment eased somewhat in April. For instance, the index for expected new orders dropped from 30 to 21. Still, this suggests relatively strong growth in sales over the coming months, with similar optimism for shipments, utilization, hiring, and capital spending. In all, it indicates that manufacturing leaders in the Richmond Fed District are hopeful in their overall outlook despite the slippage in the forward-looking measures in this survey.

Meanwhile, pricing pressures are anticipated to be quite minimal. The prices paid for raw materials edged down from 0.85 percent at the annual rate in March to 0.78 percent in April. Likewise, final goods prices rose just 0.30 percent, down from the 0.32 growth rate the month before. Pricing pressures six months from now also eased, down from 1.81 percent to 1.32 percent.

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

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