Tag: savings rate

Monday Economic Report – May 4, 2015

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

The U.S. economy stagnated in the first quarter, with real GDP growing by just 0.2 percent. This compares to a consensus estimate of 1.1 percent, and it was lower than the 5.0 percent and 2.2 percent growth rates observed in the third and fourth quarters of 2014, respectively. As one might expect from a data point that is just shy of zero, the underlying contributions to growth were mixed. Net exports and government spending were drags on activity in the first quarter, particularly with headwinds from a stronger dollar. Consumer spending on goods and nonresidential fixed investment were also weak, with the latter experiencing sharp declines stemming from the energy market and its supply chain. The bright spots—to the extent that you could call them that—were service-sector spending and a rebound in inventories. (continue reading…)

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Personal Spending Picked Up a Little in March, but Income Growth was Flat

The Bureau of Economic Analysis said that personal spending rose 0.4 percent in March. As such, consumer spending accelerated from February’s 0.2 percent gain and declines in December and January. From a manufacturing perspective, both durable and nondurable goods spending were higher in March, up 1.8 percent and 0.6 percent, respectively. While this is encouraging, particularly if it is the beginning of a rebound, these data also show just how weak consumer spending on goods has been in the first quarter, down 2.2 percent from the fourth quarter. Indeed, the year-over-year pace of personal spending growth has fallen from 4.3 percent in October to 3.0 percent in March. The good news is that this spill represents a modest pace of growth. (continue reading…)

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Personal Spending Fell in January for the Second Straight Month

The Bureau of Economic Analysis said that personal spending decreased by 0.2 percent in January, falling for the second straight month. Durable and nondurable goods spending were also lower in both December and January, and these data suggest that Americans remain cautious in their spending. Of course, there could also be other factors at play, such as lower gasoline prices and heavy snow storms in some regions of the country. Still, on a year-over-year basis, personal spending has increased 3.6 percent, a fairly decent growth rate. (continue reading…)

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Personal Spending Fell in December

The Bureau of Economic Analysis said that personal spending fell 0.3 percent in December, the first decline in consumer activity since January. In so doing, the year ended as it begun, with softer personal spending. January’s decline was lower, however, because of winter conditions; whereas, the decrease in December appears to be due to lingering caution. Consumer purchases of durable and nondurable goods were off 1.2 percent and 1.3 percent, respectively.

The surprising part of this data is that the decline in personal spending in December came at a time when consumer confidence and personal income growth were both moving higher, but perhaps that signals better spending data in the months ahead. On the positive side, personal spending rose 3.6 percent in 2014, which was decent pace overall. (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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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 – May 12, 2014

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

In her testimony before the Joint Economic Committee last Wednesday, Federal Reserve Chair Janet Yellen discussed progress to date in the economy since the recession and touched on some of the weaknesses during the first quarter of this year. Specifically, she said the following:

Although real GDP growth is currently estimated to have paused in the first quarter of this year, I see that pause as mostly reflecting transitory factors, including the effects of the unusually cold and snowy winter weather. With the harsh winter behind us, many recent indicators suggest that a rebound in spending and production is already under way, putting the overall economy on track for solid growth in the current quarter. One cautionary note, though, is that readings on housing activity—a sector that has been recovering since 2011—have remained disappointing so far this year and will bear watching.

The Federal Reserve expects real GDP to grow 2.8 percent to 3.0 percent this year, and for that to happen, it would suggest a relatively strong rebound in activity in the coming months. This is particularly true given the stagnant growth in the first quarter. Nonetheless, the Federal Open Market Committee continues to worry about sufficient “slack” in the labor market, even with recent progress. Weak manufacturing job openings figures tend to support this view. Yellen testified that “a high degree of monetary accommodation remains warranted.” The Federal Reserve is expected to maintain historically low short-term interest rates for the foreseeable future, with rates starting to rise sometime in 2015. Regarding its asset purchasing program, it is anticipated to wind down by this autumn.

Consumers, meanwhile, remain hesitant to take on too much credit card debt, a deleveraging trend that we have seen throughout the economic recovery. While consumer credit outstanding rose 6.7 percent in March, the bulk of that increase stemmed from gains in nonrevolving loans. Nonrevolving credit, which includes auto and student loans, has increased 7.8 percent over the past 12 months. Yet, revolving credit, which includes credit cards and other credit lines, was up just 0.85 percent year-over-year. However, consumers are continuing to increase their spending, but they might be dipping into savings more to make these purchases, with the savings rate down to 3.8 percent in March. This was off from an average of 5.3 percent and 4.5 percent in 2012 and 2013, respectively.

On the trade front, manufactured goods exports have risen at a very slow 1.1 percent pace in the first quarter relative to the same time frame in 2013. This continues the deceleration in the growth rate for manufactured goods exports that we have seen over the past two years, with 2014 year-to-date growth down from last year’s 2.4 percent pace. On the positive side, exports of U.S.-manufactured goods to many of our largest trading partners rose in the first quarter of 2014. However, exports to our largest trading partner (Canada) remain soft, down 0.4 percent in the first three months of this year versus last year. We remain hopeful that exports will improve in the coming months. For more on international trends, see the latest Global Manufacturing Economic Update, which was released on Friday.

There will be a lot of new data out this week to digest. Several indicators will show the health of the manufacturing sector in the United States, including April readings on industrial production and new May surveys from the New York and Philadelphia Federal Reserve Banks. They are expected to show modest pickups in demand and output, building on recent rebounds. The other key figure to watch—particularly with the attention given to it in Yellen’s testimony and in the media—will be housing starts. Consensus estimates for new residential construction reflect some easing from March’s 946,000 unit annualized pace, probably down to around 910,000 to 920,000. Other highlights this week include new data on consumer confidence, consumer and producer prices, retail sales, small business sentiment and state employment.

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

top export markets growth YTD - may2014

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