NAM: Monday Economic Report
Manufacturing production rebounded for the second straight month, rising by 3.8% and 7.2% in May and June, respectively. In June, all 19 major manufacturing sectors had increases in production, as the industry attempts to recover from steep declines since February. Yet, it will take a while for output to get back to prerecession levels. On a year-over-year basis, manufacturing production has declined 11.2%, with durable and nondurable goods output down 14.3% and 7.4%, respectively.
Manufacturing capacity utilization registered 60.0% in April, the lowest rate in the data’s history, which dates to January 1948, and it increased to 62.3% in May and 66.9% in June. It registered 75.2% in February.
Regionally, manufacturers in the New York and Philadelphia Federal Reserve Bank districts both reported expanding activity in July, with rebounding new orders and employment. Respondents also felt positive about growth over the next six months.
With the motor vehicle sector continuing to come back online, Michigan created the most net new manufacturing jobs in June. Other states with notable employment growth for the month included Ohio, Kentucky, California, Illinois and Indiana. Even with better data in May and June, however, there continue to be sizable declines in manufacturing employment due to COVID-19.
Consumer spending at retailers rose 7.5% in June, extending the robust 18.2% gain in May. This suggests that Americans have continued to return to stores to make purchases after stay-at-home orders sent sales plummeting. With that said, the July data will be closely watched, as further expansion of the COVID-19 virus has led to renewed restrictions and closures in some areas of the country, which could lead to reduced demand and increased hesitance for many consumers.
Along those lines, consumer confidence dipped in July as Americans “reassess the likely economic impact from the coronavirus on their personal finances and on the overall economy.”
New residential construction soared 17.3% in June, and the housing market is showing signs of life after plummeting dramatically in April to the slowest pace since February 2015. This was buoyed by mortgage rates, which hit another all-time low last week, falling below 3% for the first time ever. However, new housing starts remain 4% lower than one year ago.
Meanwhile, housing permits increased modestly to a three-month high, pointing to stronger growth in the housing market over the coming months, albeit at a rate well below from earlier in the year. For their part, builders also feel more upbeat in their expectations for single-family sales over the next six months, with the outlook returning to pre-pandemic levels.
Consumer prices jumped 0.6% in June, led by higher prices for energy and food. Excluding food and energy, consumer prices increased 0.2% for the month. Overall, even with higher consumer costs in June, the data continue to reflect deflationary effects in the economy due to the COVID-19 outbreak and a global recession. Core inflation has risen 1.2% since June 2019, the same rate as in May and remaining the lowest since March 2011.