NAM: Monday Economic Report
This past week, economic data have confirmed the ongoing trends within the U.S. manufacturing sector and overall economy. Demand remains strong, but supply chain and labor-related factors continue to constrain growth. Please see a summary of these releases below, with a deeper dive on the most important economic releases following.
In the second quarter of 2021, real gross domestic product grew 6.5% at an annualized rate, or 12.2% against the second quarter of 2020, according to the initial estimate of the Bureau of Economic Analysis. This marked the first quarter when real GDP surpassed the pre-pandemic level achieved in Q4 2019.
Durable goods orders and shipments remained strong in the month of June. Durable goods orders rose 0.8% in June versus May, while shipments rose 1.0% in June versus May. Durable goods orders have risen a remarkable 13 of the last 14 months, and in June, they surpassed their pre-pandemic high reached in March 2019. Capital goods orders excluding defense and aircraft grew 0.5% in June versus May to also reach a new all-time high.
Preliminary international trade figures for June showed that exports grew only 0.3% versus May, while imports rose 1.5%. The monthly trade deficit grew to more than $91 billion in June. Both imports and exports rose significantly versus this time last year.
At its two-day meeting last week, the Federal Reserve’s Federal Open Market Committee left the benchmark federal funds rate unchanged at a target range of 0% to 0.25%. The FOMC also maintained the current pace of asset purchases at $120 billion per month. The FOMC noted progress on reaching its inflation and employment goals but indicated it would need to see further progress in the coming months before tapering its rate of bond purchases.
New single-family home sales for June came in at a seasonally adjusted annual rate of 676,000 units. June sales were at their lowest rate in 14 months and 19% lower than in June 2020. Pandemic-related fiscal and monetary stimuli helped boost recent demand for housing. However, the supply side has lagged, resulting in a shortage of homes for sale and rising prices, which contributed to this deceleration in new home sales.
According to a survey by the Federal Reserve Bank of Dallas, manufacturing activity held up at strong levels in July, despite ongoing supply constraints. The production index from the Texas Manufacturing Outlook Survey was up from 29.4 points in the previous month to 31.0 points in July. This result was above the year-to-date average of 26.1 points and surpassed historical averages by wide margins.
The Richmond Federal Reserve District regional manufacturing index remained firm in July, rising by one point from a strong reading of 26 to 27. (Note that readings greater than 0 equal growth.) Both shipments and employment showed stronger growth than the June survey, while orders grew at a slower rate, according to survey respondents. Inventories of raw materials and finished goods both hit record lows in this survey. Responses showed that manufacturers are struggling to find needed workers with the appropriate skills.
According to the June monthly personal income and outlays report by the Bureau of Economic Analysis, personal incomes grew 0.1% in June versus May to $20.4 trillion annualized. Personal consumption expenditures grew 1.0% in June to $16.3 trillion annualized. Falling government income support offset rising incomes. The savings rate fell to 9.4% in the month of June.
The Conference Board Consumer Confidence Index increased for the sixth consecutive month in July. Consumer confidence is at its highest level since February 2020, suggesting U.S. consumers remain optimistic about the economic recovery, despite inflationary pressures and growing concerns about the spread of COVID-19 variants.
Initial claims for unemployment insurance totaled 400,000 in the week ending July 24, a decrease of 24,000 from the previous week, seasonally adjusted. For the week ending July 17, continued claims totaled 3,269,000, up slightly from the previous week, and accounting for 2.4% of the workforce.
Editor’s Note:Thanks to Jordan Vickers, director of economics at Eaton Corporation, for writing this week’s economic report.