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NAM: Monday Economic Report

  1. Manufacturing production increased 0.3 percent in October, rising for the fifth straight month to the highest level since June 2008. The sector continues to see strong growth overall, with manufacturing output up 2.7 percent over the past 12 months. In addition, manufacturing capacity utilization inched up to the best rate since July 2015.

  2. Total industrial production edged up 0.1 percent in October, with negative output growth for both mining and utilities. Nonetheless, industrial production has risen 4.1 percent, a solid reading.

  3. Three surveys on regional manufacturing activity released last week showed continued expansion in November and a mostly positive outlook for the next six months. The Kansas CityNew York and Philadelphia Federal Reserve Banks also noted highly elevated paces for raw material costs, both now and for future months.

  4. Consumer prices rose 0.3 percent in October, the fastest pace of monthly growth since January, led by higher energy costs. The consumer price index has risen 2.5 percent over the past 12 months, and core inflation, excluding food and energy prices, remained at 2.2 percent year-over-year. Overall, the data indicate some stabilization in price growth for now, albeit at a pace that is higher than Americans have become accustomed to in recent years.

  5. Retail sales jumped 0.8 percent in October, bouncing back from slight declines in August and September and the strongest monthly growth rate since May. More importantly, it was further proof that consumer spending remains a bright spot in the economy. Over the past 12 months, retail sales have risen a relatively healthy 4.6 percent.

  6. The National Federation of Independent Business (NFIB) reported that the Small Business Optimism Index pulled back in October but remained not far from the all-time high. Challenges with finding labor remained the “single most important problem” once again. Along those lines, The Manufacturing Institute and Deloitte released an update on the skills gap, noting that the sector will need to fill as many as 2.4 million jobs between now and 2028, among other findings.

  7. Consumer Price IndexConsumer prices rose 0.3 percent in October, the fastest pace of monthly growth since January. Higher energy costs, up 2.4 percent, propped up the headline number in October, but food prices edged down 0.1 percent. Excluding food and energy, consumer prices increased 0.2 percent in October. The consumer price index has risen 2.5 percent over the past 12 months, slowing from 2.9 percent growth in July (the highest year-over-year rate since February 2012) but up from 2.3 percent in the prior report. Core inflation remained at 2.2 percent year-over-year, suggesting price growth excluding food and energy has stabilized for now, albeit at a pace that is higher than Americans have become accustomed to in recent years.

  8. Industrial ProductionManufacturing production increased 0.3 percent in October, rising for the fifth straight month to the highest level since June 2008. Durable and nondurable goods output rose 0.5 percent and 0.2 percent in October, respectively. The sector continues to see strong growth overall, with manufacturing output up 2.7 percent over the past 12 months. (The year-over-year pace registered 3.8 percent in September, but that had more to do with pullbacks in activity related to several severe hurricanes in 2017.) In addition, manufacturing capacity utilization inched up from 76.1 percent in September to 76.2 percent in October, the best rate since July 2015.Meanwhile, total industrial production edged up 0.1 percent in October, also rising for the fifth consecutive month. Yet, output in the mining and utilities sectors fell for the month, making headline growth slower than it would have been otherwise. On a year-over-year basis, industrial production has risen 4.1 percent, a solid reading.

  9. Kansas City Fed Manufacturing SurveyManufacturing activity accelerated in the latest survey, with the composite index up from 8 in October to 15 in November, the best reading since July. New orders, production, shipments and exports improved for the month, but employment growth and the average employee workweek slowed a bit. In addition, expectations for the next six months also eased somewhat in the latest release for many of the key indicators, but the data continued to reflect a mostly positive outlook. Encouragingly, respondents predict a pickup in hiring and capital spending for the coming months—a sign of optimism in that it would indicate a willingness to invest more in people and the business. On the downside, raw material prices were seen continuing to rise at highly elevated levels.

  10. New York Fed Manufacturing SurveyManufacturing activity improved somewhat in the latest survey, with the headline index up from 21.1 in October to 23.3 in November. Shipments, inventories, employment and the average employee workweek accelerated with solid growth in November, and new orders were also healthy despite some slight easing. More importantly, manufacturers in the Empire State Manufacturing Survey remain extremely upbeat in the outlook for growth as they prepare to move into 2019. On the downside, raw material costs continued to be highly elevated, with nearly 63 percent of respondents expecting higher input prices over the next six months.

  11. NFIB Small Business SurveyThe National Federation of Independent Business (NFIB) reported that the Small Business Optimism Index pulled back for the second straight month from August’s all-time high (108.8), but the headline index remained highly elevated at 107.4. Similarly, the percentage of respondents saying the next three months would be a “good time to expand” has declined from 34 in August (a record high) to 30 in October but continued to suggest robust activity.At the same time, the labor market remained solid. Respondents cited the quality of labor (23 percent) as the top “single most important problem” for the ninth consecutive month, illustrating the current difficulty in finding new workers. The pace of job openings remained the highest in the survey’s history, but the net percentage planning to hire new workers in the next three months inched down slightly in October. Sales and capital spending plans also remained strong.

  12. Philadelphia Fed Manufacturing SurveyManufacturing activity slowed in the district’s latest release, with the composite index of general business conditions easing from 22.2 in October to 12.9 in November. New orders, shipments, hiring and the average employee workweek decelerated in their growth rates, pulling the headline index lower, but the data also continued to reflect a relatively healthy pace of activity overall. In addition, manufacturers in the Philadelphia Federal Reserve region remain very optimistic about growth moving forward, with 57.5 percent of respondents anticipating more sales and at least 40 percent expecting more hiring and capital spending. Yet, pricing pressures were intense, as 60.2 percent of respondents predict higher input costs over the next six months. In special questions, respondents predicted prices and compensation to increase 3.0 percent over the next year.

  13. Retail SalesSpending at retailers jumped 0.8 percent in October, bouncing back from slight declines in August and September and the strongest monthly growth rate since May. More importantly, it was further proof that consumer spending remains a bright spot in the economy. Over the past 12 months, retail sales have risen a relatively healthy 4.6 percent, up from 4.2 percent year-over-year in September. The largest increases for the month included building material and garden supply stores, electronics and appliance stores, gasoline stations, miscellaneous store retailers and motor vehicle and parts dealers. Sales declined for food services and drinking places and furniture and home furnishings stores. Higher prices boosted gasoline station sales. Excluding gasoline stations, total retail sales rose 0.5 percent in October, or 3.6 percent year-over-year.

  14. State Employment ReportCalifornia created the most net new manufacturing jobs in October, adding 6,600 workers. Pennsylvania (up 3,000), New Jersey (up 2,200) and Michigan (up 2,000) also topped the list of manufacturing employment gains in October. Meanwhile, Texas saw the greatest job gains in the sector over the past 12 months, with manufacturing employment in the state up 29,900 since October 2017. Other states with the fastest manufacturing job growth year-over-year included Wisconsin (up 20,000), Ohio (up 13,200), Illinois (up 12,800), Florida (up 11,800), Michigan (up 10,500) and Alabama (up 10,200). Meanwhile, Hawaii continued to have the lowest unemployment rate in the nation in October at 2.3 percent.

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