NAM: Monday Economic Report
The Institute for Supply Management® reported that the manufacturing sector expanded in October at the fastest pace since September 2018, with the sector continuing to rebound from COVID-19-related weaknesses in the spring. The data were buoyed by robust growth in new orders, which rose at rates not seen since January 2004. With that said, there are also hints at lingering supply chain disruptions in the ISM despite solid progress since April in these data.
New orders for manufactured goods rose 1.1% in September, increasing for the fifth straight month. Despite recent progress, new factory orders have fallen 3.9% year-over-year, due largely to severe COVID-19 disruptions in March and April. More encouragingly, core capital goods spending—a proxy for capital spending in the U.S. economy—rose 1.0% in September, with 4.5% growth over the past 12 months.
Manufacturing added 38,000 workers in October, rising for the sixth straight month. Despite recent gains, the labor market for the sector remains well below its pre-COVID-19 pace, with manufacturing employment down by 621,000 in October relative to the level in February. The current outlook is for 12,300,000 employees in the manufacturing sector at year’s end, with continued growth next year, up from 12,231,000 in October.
Overall, nonfarm payroll employment in the United States increased by 638,000 in October, also expanding for the sixth consecutive month but down by 10,090,000 since February. The unemployment rate fell from 7.9% in September to 6.9% in October.
Private manufacturing construction spending fell 2.1% in September, with a 10.0% decrease year-over-year. Total private nonresidential spending declined 1.5% in September and 6.0% over the past 12 months. Private residential construction was a bright spot in the September data, once again boosted by historically low mortgage rates (which hit another record low last week).
The U.S. trade deficit pulled back from the highest level since August 2006, decreasing from $67.04 billion in August to $63.86 billion in September, with growth in goods exports outpacing the increase in goods imports for the month.
According to the latest update from TradeStats Express, U.S.-manufactured goods exports totaled $857.65 billion through the first three quarters of 2020, using seasonally adjusted data, dropping 16.32% from $1,024.86 billion year to date in 2019 and the slowest pace since 2010.
The Federal Open Market Committee left interest rates unchanged, as expected, and will continue to have a highly accommodative monetary policy to support more economic growth. The Federal Reserve notes progress in the economy since the spring but acknowledges uncertainties in the outlook will persist as long as COVID-19 is an ongoing challenge.