NAM: Monday Economic Report
The U.S. economy jumped 33.4% at the annual rate in the third quarter, the largest increase in the history of the series, which dates to 1947. Despite soaring in the third quarter, real GDP remained down 3.4% year to date. The forecast for growth in the fourth (or current) quarter is 6.0%, with 4.5% growth anticipated for 2021.
Real value-added output in the manufacturing sector rose to $2.213 trillion in the third quarter, as expressed in chained 2012 dollars. It remained down 1.0% from the all-time high recorded in the fourth quarter of 2019 ($2.236 trillion), despite tremendous volatility year-to-date. Overall, manufacturing accounted for 11.0% of real GDP in the third quarter, with value-added output (in nominal terms) up to $2.329 trillion, just 1.7% from a record high.
In the latest NAM Manufacturers’ Outlook Survey, 74.2% of respondents were either somewhat or very positive about the outlook for their company. It represented notable improvement after the 33.9% and 66.0% readings in the second and third quarters, respectively.
Just over 29% of manufacturers said that their revenues will have recovered either before or during the fourth quarter, and 67.7% anticipate that their revenues will be back to pre-pandemic levels by the end of 2021. After two quarters with weaker domestic demand topping the list of primary business challenges, the inability to attract and retain talent led the pack once again in the fourth quarter.
New orders for durable goods rose 0.9% in November, rising for the seventh straight month. Overall, the durable goods manufacturing sector has bounced back soundly following steep declines in March and April due to the COVID-19 pandemic. On a year-over-year basis, new durable goods orders have grown by 3.8% since November 2019.
Orders for nondefense capital goods excluding aircraft—a proxy for capital spending in the U.S. economy—increased 0.4% to $70.90 billion in November, a new monthly record.
Manufacturing businesses in the Richmond Federal Reserve Bank’s district expanded for the sixth straight month, and respondents expect continued growth over the next six months.
In last week’s releases for December, the Conference Board and the University of Michigan provided mixed news on consumer confidence. However, Americans were cautiously upbeat in their outlook, despite assessments of the economy being well below levels seen before the pandemic.
Personal consumption expenditures declined 0.4% in November, falling for the first time since April. The savings rate remained elevated at 12.9%. These data suggest that Americans were more hesitant in their consumer spending in November—something that will not be welcome news for retailers heading into the holiday season. Over the past 12 months, personal spending has fallen 1.3% since November 2019, largely on reduced spending for services.
Meanwhile, personal income fell 1.1% in November, but it has risen by 3.8% year-over-year. Manufacturing wages and salaries increased to $955.2 billion in November, with 3.7% growth over the past 12 months.
Existing and new home sales both pulled back in November, but activity remained very robust on a year-over-year basis. The housing market continued to be a bright spot, buoyed by historically low mortgage rates. However, inventories remain very low, pushing prices higher.
Note: The Monday Economic Report will not be published on January 4, 2021. The next issue will be released on Monday, January 11.