NAM: Monday Economic Report
Manufacturing production rebounded for the second straight month, showing signs of stabilization after declining in each of the first four months of 2019 (March data were “unchanged,” but marginally negative). Output in the sector increased 0.4 percent in June, extending the 0.2 percent gain in May. Durable and nondurable goods production rose 0.4 percent and 0.5 percent, respectively, for the month, led by strong growth for computer and electronic products, motor vehicles and parts, nonmetallic mineral products and petroleum and coal products, among others.
Yet, the data also reflect the toll from slowing global activity and trade uncertainties year to date. In fact, manufacturing production has risen just 0.4 percent over the past 12 months. That represents a sharp deceleration from the 3.5 percent year-over-year pace in September. Likewise, manufacturing capacity utilization rose from 75.6 percent in May to 75.9 percent in June, a three-month high, but capacity has also eased from 77.3 percent in December, which was the best reading since March 2008.
Manufacturing activity also bounced back in the New York and PhiladelphiaFederal Reserve Bank districts. However, the Empire State Manufacturing Survey continued to reflect weaknesses in demand and hiring. Looking ahead six months, respondents to both surveys remained upbeat in their outlook, but pricing pressures were expected to pick up somewhat.
Retail spending continued to strengthen, rising 0.4 percent for the third straight month in June. Overall, Americans accelerated their spending in the second quarter after being more hesitant in their purchasing in the first quarter. Over the past 12 months, retail sales have risen a modest 3.4 percent, or 3.8 percent year-over-year with motor vehicles and gasoline station sales excluded.
New housing starts declined 0.9 percent, down from an annualized 1,265,000 units in May to 1,253,000 units in June. The housing market remains softer than desired despite reduced mortgage rates. Over the past 12 months, housing starts have risen 6.2 percent, up from 1,180,000 units in June 2018. However, single-family starts fell 0.8 percent, highlighting weaknesses in that all-important segment, especially in the Northeast and West.
While builders feel upbeat about sales over the next six months despite affordability and workforce challenges, housing permits—a proxy of future activity—dropped 6.1 percent in the latest report, led by a sharp decline in multifamily permitting, which can be highly volatile from month to month. On the other hand, permits for single-family units were higher.
Manufacturing value-added output edged up from $2.3845 trillion in the fourth quarter to $2.3852 trillion in the first quarter, eking out another all-time high. In addition, in chained 2012 dollars, real value-added output also set a new record, up from $2.155 trillion in the fourth quarter to $2.178 trillion in the first quarter. Manufacturing accounted for 11.3 percent of real GDP in the first quarter.