NAM: Monday Economic Report
Manufacturing production jumped 1.4% in July, the strongest monthly gain since March. Motor vehicles and parts output soared 11.2% in July, but production in the sector remained down 3.6% since January. Excluding motor vehicles, manufacturing production increased 0.8% in July, suggesting broad-based strength beyond autos. Manufacturing capacity utilization rose from 75.5% in June to 76.6% in July, the best reading since January 2019.
Manufacturing production has soared 7.4% over the past 12 months, with the index exceeding pre-pandemic levels of output for the first time. In fact, output in the sector was the strongest since August 2019. Moving forward, I would expect for manufacturers to be back to pre-pandemic levels in the third quarter, with production rising roughly 6% and 3% in 2021 and 2022, respectively.
Surveys from the New York and Philadelphia Federal Reserve Banks showed the expansions of manufacturing activity slowing somewhat in August, but with respondents continuing to be positive about growth over the coming months. Pricing pressures remained highly elevated, both for raw materials and for final goods and services, including new records for the latter.
New residential construction activity declined 7.0% from 1,650,000 units at the annual rate in June to 1,534,000 units in July, the slowest pace since April. Housing starts have decelerated since March’s pace, which was the strongest since July 2006, with significant challenges in the housing market from rising construction costs, affordability issues and difficulties in finding workers.
The Housing Market Index declined from 80 in July to 75 in August, a 13-month low, according to the National Association of Home Builders and Wells Fargo. With that said, builders remained very optimistic that the housing market will improve in the months ahead.
Despite some easing since January, housing permits rose 2.6% in July to 1,635,000 units at the annual rate. Permits have risen 6.0% since July 2020, with single-family and multifamily permitting up 5.5% and 6.9% year-over-year, respectively.
After rising 0.7% in June, retail sales fell 1.1% in July, continuing the seesaw pattern seen over the past four months. The disappointing data speak to ongoing supply chain issues and the increase in the spread of the COVID-19 delta variant, most notably at motor vehicles and parts dealers. Excluding automobiles, retail spending decreased 0.4% for the month.
Despite the pullback in the latest data, retail spending has soared 15.8% over the past 12 months, with retail sales excluding automobiles and gasoline rising 13.8% year-over-year.
Initial unemployment claims totaled 348,000 for the week ending Aug. 14, the lowest since the week of March 14, 2020.
Texas created the most net new manufacturing jobs in July, adding 8,300 workers.