On the six-month anniversary of the passage of the Tax Cuts and Jobs Act, Congress’ top tax writer praised the National Association of Manufacturers (NAM) and President and CEO Jay Timmons in a Capitol press conference for the organization’s advocacy.
“Thank you to Jay for your leadership of America’s manufacturers,” said House Ways and Means Committee Chairman Kevin Brady (R-TX) as Timmons, House Speaker Paul Ryan (R-WI) and Treasury Secretary Steven Mnuchin looked on. “This pro-growth tax reform would not have occurred but for your leadership.”
Earlier that day, the NAM released its latest quarterly Manufacturers’ Outlook Survey in conjunction with the anniversary. The results were eye-popping: more than 95 percent of manufacturers surveyed were optimistic about their business outlook—the highest rating in all of the survey’s 20-year history.
Speaker Ryan and Chairman Brady echoed the record-setting results.
“Today there is record optimism among our nation’s manufacturers,” said Ryan. “Tax reform, to be blunt, is the game-changer our economy needed.”
“Our manufacturers are now armed with one of the most pro-growth tax codes in the world. And since tax reform was signed into law, over 70 percent of manufacturers have increased hiring and their workers’ wages due to tax reform,” said Brady.
Marlin Steel Wire Products President and Owner Drew Greenblatt and Jamison Door President and CEO John Williams, both NAM members, also participated in the press conference, along with workers from each company’s shop floor. The full event can be viewed here.
Conducted by NAM Chief Economist Chad Moutray, the Manufacturers’ Outlook Survey has surveyed the association’s membership of 14,000 large and small manufacturers on a quarterly basis for the past 20 years to gain insight into their economic outlook, hiring and investment decisions and business concerns.
The NAM releases these results to the public each quarter. Further information on the survey is available here.
As expected, the Federal Open Market Committee (FOMC) ended its June 12–13 meeting by hiking short-term rates by 25 basis points. This action—the second increase so far in 2018—was widely expected, with markets already pricing it in. More importantly, the Federal Reserve’s economic projections signal that there could be four hikes in the federal funds rate this year, up from a consensus estimate of around three. With the Federal Reserve’s action, the target range for the federal funds rate is now 1.75 to 2 percent. The projections show that range rising to 2.4 percent by the end of 2018 and 3.1 percent in 2019. The latter would indicate three hikes next year. With that said, the FOMC will hinge future interest rate increases on incoming data. Read More
The Institute for Supply Management (ISM) reported that manufacturing activity rebounded in May, with continued strength in demand. The ISM Manufacturing Purchasing Managers’ Index rose from 57.3 in April to 58.7 in May. The underlying data increased, including new orders (up from 61.2 to 63.7), production (up from 57.2 to 61.5) and employment (up from 54.2 to 56.3). The index for new orders has now been 60 or greater for 13 straight months, illustrating the robustness of sales in the sector across the past year. The sample comments tend to echo that finding, with respondents noting healthy growth in activity and a promising outlook, even as they cite some trade worries. Along those lines, exports eased a bit (down from 57.7 to 55.6), but expanded modestly overall. Read More
The Institute for Supply Management (ISM) said that manufacturing activity continued to expand modestly in April, even as it pulled back for the second straight month from February’s best reading since May 2004. The ISM Manufacturing Purchasing Managers’ Index (PMI) declined from 60.8 in February to 59.3 in March to 57.3 in April, its lowest level since July 2017. Softer production (down from 61.0 to 57.2), exports (down from 58.7 to 57.7) and employment (down from 57.3 to 54.2) growth help to explain the softer headline number in April. The exports figure eased for the second consecutive month, down from the February rate, which had been the fastest since April 2011.
Despite some weakening in other measures, new orders (down from 61.9 to 61.2) decelerated slightly but remained robust overall, which was encouraging. To illustrate just how strong demand has been in the manufacturing sector, it was the 12th straight month with the new orders index at 60 or higher—a threshold that would suggest robust sales growth. The sample comments tend to echo that finding, with respondents noting healthy growth in activity and a promising outlook, even as they cite some trade worries.
With ever-stronger economic growth, manufacturers report accelerated input costs. Indeed, prices for raw materials (up from 78.1 to 79.3) have remained highly elevated, with the measure at a level not seen in seven years. More than 61 percent of manufacturing respondents said that their costs had risen in April, with just 2.6 percent suggesting that they were lower. This reflects a rebound in some commodity costs, even as overall pricing pressures continue to be largely modest, at least for now.
In other news, inventories (down from 55.5 to 52.9) expanded in April for the fourth straight month, even as the pace of growth slowed from February’s near eight-year high. More than anything, the recent growth in inventories is consistent with the healthy growth in overall production.
The Bureau of Labor Statistics reported that hiring in the manufacturing sector rose in February to its best reading since November 2007, according to the latest Job Openings and Labor Turnover Survey data. The manufacturing sector hired 380,000 workers in February, up from 360,000 in January. That reflected stronger activity for both durable (up from 212,000 to 215,000) and nondurable (up from 149,000 to 165,000) goods businesses. At the same time, total separations—including layoffs, quits and retirements—rose from 343,000 to 352,000, a level not seen since May 2009.
As a result, net hiring (or hires minus separations) rose from 17,000 in January to 28,000 in February, a four-month high. More importantly, however, net hiring has averaged a rather healthy 16,417 over the past 12 months, with a robust average of 25,142 over the past seven months.
Meanwhile, there were 426,000 manufacturing job openings in February, inching up from 424,000 in January. That was the strongest reading since September (445,000), which was a pace not seen since January 2001. In fact, the job postings rate in February was only the sixth time since the indicator started in December 2000 that openings have exceeded 400,000. In the latest figures, nondurable goods firms posted more jobs in February (up from 152,000 to 158,000), which was just enough to offset a slightly slower pace of openings for durable goods manufacturers (down from 273,000 to 269,000).
The pace of job openings has continued to trend higher overall. For comparison purposes, monthly job openings in the sector averaged 389,667 in 2017, up from 341,250 in 2016. Moving forward, renewed strength for job openings would be anticipated in the coming months.
Turning to the larger economy, job openings for nonfarm payroll businesses dropped from 6,228,000 in January to 6,052,000 in February. January’s rate was the second highest in the survey’s history, narrowly edged out by the 6,231,000 openings in September. In the latest data, job openings increased in financial activities, government, health care and social assistance, information, manufacturing and other services sectors. At the same time, net hiring among nonfarm businesses continued to be very solid, at 255,000 and 315,000 in January and February, respectively.