NAM: Monday Economic Report
The data on manufacturing activity were also uplifting. For instance, new durable goods orders jumped 2.2 percent in September, extending the 2.0 percent gain in August. The data have been highly volatile over the past three months, mostly on large swings in nondefense aircraft and parts orders, which rose 31.5 percent in September. Excluding transportation equipment, new durable goods orders increased 0.7 percent in this report, the same pace as in August. New durable goods orders have trended generally in the right direction across the past 12 months, having increased by a very healthy 8.3 percent since September 2016, or excluding transportation equipment, the year-over-year gain was 7.5 percent. Durable goods shipments were also positive, up 1.0 percent in September, with a healthy 7.0 percent gain year-over-year.
At the same time, the IHS Markit Flash U.S. Manufacturing PMI rose to its highest point since January, up from 53.1 in September to 54.5 in October. It is hoped this is a sign that the lull in the spring and summer months has stabilized. Manufacturers in the United States reported accelerating rates of growth for new orders, output, exports and employment, with the hiring measure having its best reading since June 2015. Regionally, manufacturing activity continued to reflect progress in both the Kansas City and RichmondFederal Reserve Bank districts. The Kansas City Federal Reserve’s composite index of general business conditions expanded at its fastest pace since March 2011, and respondents cited a number of challenges in finding qualified labor as employment markets have tightened significantly in the area. In contrast, activity eased slightly in the Richmond Federal Reserve’s region, but the data largely reflect notable progress over the past year. In both surveys, while manufacturers feel very optimistic about new orders and shipments over the next six months, they expect pricing pressures to accelerate somewhat.
Internationally, Europe continued to be a bright spot in the global economy. The IHS Markit Flash Eurozone Manufacturing PMI remained robust in preliminary October data, with activity in the sector at an 80-month high. In addition to strengthening new orders and exports, employment grew at its fastest rate in the 20-year history of the survey. In addition to data for Europe as a whole, IHS Markit also released preliminary figures for France and Germany, both of which indicated robust expansions for manufacturers. As a sign of just how much things have turned around in France of late, manufacturing activity expanded at its best pace since April 2011 on stronger growth across the board. To put that in perspective, the headline French number contracted as recently as September 2016.
Beyond those measures, the latest data on consumer confidence and new home sales also showed encouraging signs. The Index of Consumer Sentiment from the University of Michigan and Thomson Reuters rose to a level not seen since January 2004, with Americans more upbeat in their outlook, boosted by sizable improvements in their personal finances. Meanwhile, new home sales increased to a 10-year high in September. New residential sales jumped from an annualized 561,000 units in August to 667,000 units in September, an increase of 18.9 percent and the best reading since October 2007. Sales of new single-family homes grew in every region of the country, with the largest gains in the Midwest and South. With the steep increase in the latest figures, new home sales have risen 17.0 percent since the 570,000 pace in September 2016.
This week will be another busy one on the economic indicator front, and analysts will be looking for continued signs of strength in the manufacturing sector, both in terms of sentiment and job growth. The Institute for Supply Management’s Manufacturing Purchasing Managers’ Index has reported robust expansions in new orders, output and employment in recent months, and similar results are expected in the October index, though it might show some softness due to the recent hurricanes. The Dallas Federal Reserve Bank’s latest report should show something similar. The job market has tightened significantly year to date, with healthy employment growth, though there was slightly lower activity in September related to the recent storms. Look for rebounds in employment in October.
Other highlights for this week include new data on construction spending, consumer confidence, employment costs, factory orders and shipments, international trade, personal income and spending and productivity and costs.