NAM: Monday Economic Report
Manufacturers produced $2.385 trillion in value-added output in the fourth quarter, an all-time high, with the sector accounting for 11.4 percent of real GDP. Adjusting for inflation (in chained 2012 dollars), real value-added output in manufacturing also set a new record. Overall, manufacturing contributed 0.32 percentage points to real GDP growth in the quarter.
Manufacturing production was unchanged in March, following declines in both January and February. As such, output in the sector in the first quarter of 2019 has been disappointing, with softer global growth taking a toll. In March, production increased in 10 of the 19 major manufacturing sectors.
With softer-than-desired data recently, manufacturing production grew just 1.0 percent over the past 12 months, down from 2.6 percent year-over-year in December. At the same time, manufacturing capacity utilization has dropped from 77.3 percent in December, the best reading since March 2008, to 76.4 percent in the latest data, a 10-month low.
Yet, there have also been signs of a rebound in the regional data. Manufacturing activity continued to expand modestly in the New York and Philadelphia Federal Reserve Bank surveys, improving from declines in prior months and with a favorable outlook for the next six months. In addition, raw material costs, which were a major challenge last year, have decelerated notably in both districts.
The U.S. trade deficit pulled back further from the 10-year high of $59.90 billion in December to $51.13 billion in January and $49.38 billion in February, its lowest point since June 2018. More importantly, U.S.-manufactured goods exports rose 1.65 percent in the first two months of 2019 relative to the same time frame in 2018, extending the solid growth last year overall.
The IHS Markit Eurozone Manufacturing PMI contracted for the third straight month but improved slightly after declining at the fastest pace since April 2013 in March. Manufacturers in France and Germany also reported declining activity in April.
We will get new housing starts data this week, with reduced mortgage rates expected to boost demand and affordability. For their part, home builders continued to be optimistic about single-family housing sales for the next six months, even as respondents continued to cite challenges with higher construction costs and worker shortages.
Initial unemployment insurance claims fell from 197,000 for the week ending on April 6 to 192,000 for the week ending on April 13. This was the lowest level since September 6, 1969—yet another sign that employment data remain at historic lows.