NAM's Monday Economic Report with Dr. Chad Moutray
Manufacturing outlook steadied in the fourth quarter, but remained soft, according to National Association of Manufacturers' Chief Economist Dr. Chad Moutray. Other observations in today's report:
In the latest NAM Manufacturers’ Outlook Survey, 67.6% of manufacturing respondents reported a positive outlook for their company. Manufacturing confidence has remained largely steady since the third quarter, yet optimism continues to be well below the 89.5% positive reading in March. Large businesses felt notably less upbeat in their outlook relative to other firm sizes.
Passage of the United States–Mexico–Canada Agreement, securing a trade deal with China and reauthorizing the Export-Import Bank could each make an immediate difference for manufacturers in the United States to allow them to continue growing their operations and creating well-paying jobs.
The inability to find talent remained the top concern in the NAM Outlook Survey for the ninth straight quarter. Along those lines, job openings continued to be highly elevated in the manufacturing sector, with 477,000 in October and with an average of 483,500 per month year to date.
After declining 0.7% in both September and October, manufacturing production rebounded, rising 1.1% in November and buoyed by stronger auto output. The sector continues to see signs of stabilization, but it is clearly not out of the woods yet. Production has fallen 0.8% over the past 12 months, declining on a year-over-year basis for the fifth consecutive month.
Manufacturers in the New York and Philadelphia Federal Reserve Bank districts reported slight expansions once again in December, but activity contracted for the sixth consecutive month in the Kansas City Fed’s region, pulled lower by global challenges, especially in the energy sector, and ongoing struggles in finding talent. The outlook for each region is cautiously positive.
According to IHS Markit, manufacturing in the United States continued to expand somewhat modestly in December, with respondents remaining optimistic about production in the first half of 2020. In contrast, Eurozone activity has now contracted for 11 straight months, led by lingering weaknesses in Germany.
The U.S. economy grew 2.1% at the annual rate in the third quarter, unchanged from the previous estimate. For the year, the U.S. economy should increase by 2.3% in 2019, with 1.8% growth forecasted for 2020. Fourth quarter 2019 growth is currently hovering around 2.2%.
Housing starts rose 3.2% in November, jumping 13.6% year-over-year, led by strength in single-family activity. Permits rose to the fastest pace since May 2007, with homebuilder optimism increasing to the best reading since June 1999.
Personal income and spending rose 0.5% and 0.4% in November, respectively, with 4.9% and 3.9% growth for those two measures over the past 12 months. While consumers have tended to save more this year than last, spending remains a bright spot. Consumer sentiment rose to the best reading since May, according to the University of Michigan and Thomson Reuters.
NOTE: Due to the holidays, the NAM Monday Economic Report will not be published on Monday, Dec. 30. The next issue will be released on Monday, Jan. 6.