Tag: slowing sales

Business Economists Note Slowing in the Second Quarter, Cautious Optimism Ahead

The National Association for Business Economics (NABE) released its latest Industry Survey, which found that sales and earnings decelerated somewhat in the second quarter. A net percentage of 20 percent said that their sales were rising in the second quarter, down from 47 percent in the first quarter. This brings it back to levels seen in the third and fourth quarters of 2012. In the goods-producing sector (which includes manufacturing), 43 percent of respondents said that their sales were increasing in the second quarter, down from 73 percent who said the same thing in the first quarter.

These data mirror other indicators which have found softness in the second quarter. Timothy Gill, the Chair of the NABE Industry Survey Committee and the Vice President of Business Information & Statistics for the Aluminum Association, an NAM member, said that these results “possibly [reflected] increased headwinds from a weak global economic environment and tighter domestic fiscal policy in the latest period.”

The slowing pace of sales growth has impacted profit margins. In the goods-producing industries, 29 percent of respondents said that their profits had declined over the past three months, with half of them reporting no change. That represents deterioration in profits from the first quarter, where no one in the goods-producing sectors had declining sales (relative to the fourth quarter of 2012). In the larger economy, the results were similar, with the net percentage of those reporting higher profits down from 16 percent in the first quarter to -3 percent in the second.

The news on employment was more positive. Overall, there was a pickup in hiring observed in this latest survey. While 60 percent of respondents said that they had not changed their employment levels, 29 percent noted an increase in hiring in the second quarter. That is up from 22 percent reporting increased hiring in the first quarter. This carried through to the goods-producing sectors, as well, with 29 percent of those taking the survey suggesting that they had hired new workers in the second quarter, up from 18 percent three months ago. Here, it is important to note that goods-producing industries include construction and mining, both of which have seen employment gains of late, in contrast to manufacturing.

In terms of forecasts, business economists surveyed tend to be cautiously optimistic about the next 12 months. Seventy percent think that real GDP will grow 2.1 percent to 3.0 percent between the second quarter of 2012 and the second quarter of 2013. That is up from 60 percent who said the same in the last survey and 47 percent six months ago. As such, expectations about the future economic environment have been upgraded overall.

With that said, several other economic forecasts for 2014, including the one from the Federal Reserve, predict real GDP growth rates of 3.0 percent or more, and as such, these numbers appear to be slightly more subdued. Nearly one-fifth of the respondents felt that growth would be from 1.1 percent to 2.0 percent, for instance; although, that was down from 26 percent who said the same thing three months ago.

Chad Moutray is the chief economist, National Association of Manufacturers. He is a former board member of NABE.

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Kansas City Fed Reports Contracting Activity in November

The Kansas City Federal Reserve Bank reported that manufacturing activity contracted for the second month in a row. The composite index fell from -4 in October to -6 in November.

The weaker data stem from sharp reductions in sales, which have fallen for six of the past eight months. The new orders index declined from -11 to -14 for the month, with exports shrinking for six consecutive months on slower global growth. With reduced sales, production was also lower, and employment was unchanged.

With this softness, manufacturers in the Kansas City region have become less optimistic about the next six months. The forward looking composite index has declined from 16 in September to 3 in both October and November. This suggests modest growth, but the pace is much slower than earlier forecasts. Expectations for new orders, production, shipments, and capital spending are also anticipating moderate growth consistent with this eased outlook. Hiring is not expected to change, and export sales are not anticipated to improve.

This analysis is consistent with other regional surveys showing stalled manufacturing activity right now. Uncertainties surrounding weak sales and the fiscal cliff are are hampering growth. This is further evidence that policymakers need to act sooner rather than later to avert further damage to the economy. This would go a long way toward reducing the anxieties that currently exist.

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