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NAM: Weekly Economic Update

Associated Industries of Missouri is the sole official designated partner of the National Association of Manufacturers in Missouri.

Last week served as a pause from the heavier economic releases the past several weeks, giving us some time to process recent data. For the most part, the state of the economy remains complicated, with some signs of progress but also lingering challenges keeping our optimism in check. The Federal Reserve Board was equally mixed in its assessments in its monthly Beige Book. Perhaps the best illustration of the current climate was this description of how the various Federal Reserve districts describe manufacturing activity in their regions: “Activity in the manufacturing sector was flat to slightly up in general.” That mostly speaks to the mood among manufacturers, who remain cautious in their outlook even as demand and production have improved somewhat from weaknesses earlier in the year. Indeed, two of the most recent indicators on manufacturing—the Institute for Supply Management’s (ISM) Purchasing Managers’ Index (PMI) data and the Bureau of Labor Statistics’ employment numbers—were both disappointing in August. The ISM report found that manufacturing activity contracted unexpectedly for the first time since February, and the Bureau of Labor Statistics’ release noted that manufacturers hired 14,000 fewer workers on net in August, with a decrease of 39,000 employees year to date. Moreover, the service sector also appeared to be growing slower in August, fueling economic anxieties. The ISM Non-Manufacturing PMI declined from 55.5 in July to 51.4 in August, its lowest level since February 2010. We hope the August figures were an outlier, with measures of the U.S. economy showing renewed signs of stabilization and improvement moving forward. Along those lines, there were two indicators that provided some encouragement about economic growth. First, manufacturing job openings accelerated in July for the second straight month. Postings in the sector jumped from 361,000 in June to 379,000 in July, even as openings remained below the all-time high of 397,000 in April. We have continued to see relatively healthy gains in manufacturing job openings, giving us optimism for faster hiring growth moving forward. Net hiring was also positive for the second consecutive month following four straight months of declines, but as noted earlier, actual job growth—beyond openings—indicates a lot of room for improvement. Moreover, nonfarm job openings in the larger economy hit a new all-time high, up from 5,643,000 in June to 5,871,000 in July. This was enough to beat the previous all-time high set one year ago. The other reassuring element would be consumer spending, with Americans more willing to make purchases after holding back somewhat earlier in the year. U.S. consumer credit outstanding rose 5.8 percent at the annual rate in July, or 6.0 percent over the past 12 months. Revolving credit, which includes credit cards and other credit lines, increased 5.9 percent year-over-year. That is notable because the pace of growth has accelerated across the past 12 months, up from 3.8 percent year-over-year growth in July 2015. That mirrors stronger retail and personal spending reports of late, and it would seem to indicate an increased willingness to use credit cards when making purchases. Turning to this week, we will be looking for signs of continued progress with the release of August industrial production figures on Thursday. This is particularly true after manufacturing production rebounded in July. September surveys from the New York and Philadelphia Federal Reserve Banks will provide additional detail on demand and shipments from a regional perspective. Along those lines, the NAM will release the latest findings of its Manufacturers’ Outlook Survey, including special questions on the Federal Reserve, capital spending, regulations and trade. Other highlights this week include new data on consumer confidence, producer prices, retail sales and small business optimism.
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