• AIM Team

NAM: Monday Economic Report

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Consumers have also reacted to the devastating storms in Florida and Texas, with many participants in the latest University of Michigan and Thomson Reuters survey citing the hurricanes in their responses. As a result, the Index of Consumer Sentiment declined from 96.8 in August to 95.3 in September, with Americans less positive in their perceptions about future conditions. Interestingly, their views of the current economy rose to their highest level since 2000, and overall, the headline index continues to reflect a more enthusiastic assessment of economic conditions, especially relative to the views seen last year.

For the most part, American consumers have been more willing to open their pocketbooks this year than last, with spending helping to prop up the U.S. economy. Nonetheless, there has been a bit more caution on the part of the consumer in the past few months than we might have expected, and in the most recent data, Hurricane Harvey also likely played a role. Retail spending was down 0.2 percent in August. Sales have risen 3.2 percent over the past 12 months, but the year-over-year rate has drifted lower since peaking at 5.6 percent in January. Excluding motor vehicles, retail sales increased 3.6 percent year-over-year in August, up from 2.4 percent in June but down from 5.4 percent in January.

There were a number of signs of reassurance about the economy. The Empire State Manufacturing Surveycontinued to reflect strong growth in the sector in September. The composite index of general business conditions remained highly elevated despite easing from 25.2 in August, its highest level in nearly three years, to 24.4 in September, with faster expansions for new orders, shipments and employment. Manufacturers in the New York Federal Reserve Bank’s district remained upbeat about the next six months. More than 55 percent of those completing the survey predict better new orders over the next 6 months, with 26.0 percent and 32.5 percent anticipating increased hiring and capital spending, respectively. Technology spending also picked up. In a similar manner, the National Federation of Independent Business (NFIB) said that the Small Business Optimism Index edged up from 105.2 in July to 105.3 in August, its highest level since February.

Meanwhile, the Bureau of Labor Statistics said total manufacturing hires in July was the highest since December 2007, the first official month of the Great Recession. The sector hired 341,000 workers in July, up from 324,000 in June. At the same time, total separations—including layoffs, quits and retirements—also increased, up from 315,000 to 321,000. The level of separations was the highest since June 2009, which coincidently was the last official month of the recession. As a result, net hiring (or hires minus separations) was 20,000 in July, up from 9,000 in June, its strongest monthly pace since December 2014. Job openings in the manufacturing sector remained highly elevated at 390,000 in July, but postings for nonfarm payroll businesses reached a new all-time high at 6,170,000. It was only the second time in the survey’s 17-year history that job openings have exceeded 6 million. That should bode well for additional hiring moving forward nationally.

The highlight this week will be the Federal Reserve. Inflationary pressures have decelerated since the spring months, even with higher energy costs pushing up consumer and producer prices in August. Therefore, the Federal Open Market Committee is not expected to raise short-term interest rates at its September 19–20 meeting, with a hike now more likely at its December 12–13 meeting, but participants will likely vote to start the process of normalizing its balance sheet. Other highlights for the week include new data on housing starts and permits, leading indicators and manufacturing surveys from the IHS Markit and the Philadelphia Federal Reserve Bank.

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