NAM: Monday Economic Report
Manufacturing production increased 0.9% in December, rising for the eighth straight month. Despite gains since the spring, manufacturing production remained 2.6% below the pre-pandemic pace in February. Overall, manufacturing production fell 6.5% on average in 2020, but output should rise by the same percentage in 2021.
Even as capacity remained 2.3% below what was seen in February, manufacturing capacity utilization increased from 72.7% in November to 73.4% in December, the highest rate since the COVID-19 pandemic began.
In January, manufacturing activity expanded in the New York Federal Reserve Bank’s district for the seventh consecutive month, albeit at the slowest pace since June. Business leaders were upbeat in their outlook. Yet, input costs accelerated at the fastest rate since September 2018.
Manufacturing job openings remained strong, despite pulling back from October’s all-time high, with 498,000 postings in the sector in November. In general, the U.S. had 1.64 unemployed workers for every one job opening.
The labor market has softened since October, especially in the service sector, as seen in the most recent jobs data for December. Along those lines, initial unemployment claims jumped for the week ending Jan. 9 to the highest level since the week ending Aug. 22. The pace of first-time claims accelerated sharply, with rising COVID-19 claims and increased pandemic benefits because of new legislation passed at year’s end.
Consumer spending at retailers fell 0.7% in December, with Americans reducing their purchasing for the third straight month. This weakness reflects caution on the part of consumers, but also lingering uncertainties related to the continued spread of COVID-19. Despite ending the year on a weak note, retail sales have risen by a modest 2.9% over the past 12 months.
Consumer sentiment declined from 80.7 in December to 79.2 in January, according to preliminary data from the University of Michigan and Thomson Reuters.
The National Federation of Independent Business reported that the Small Business Optimism Index dropped from 101.4 in November to 95.9 in December, its lowest level since May, with small business owners expressing anxiety about the economy and the political landscape. Taxes and workforce concerns topped the “single most important problem” list in December.
Increased energy costs helped push the consumer and producer price indices higher in December. However, the year-over-year pace of growth for both suggests that overall inflationary pressures remain largely in check, at least for now.