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economic outlook Archives - Shopfloor

Dallas Fed: Manufacturing Activity Strengthened in September

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The Dallas Federal Reserve Bank reported that manufacturing activity strengthened once again. The composite index of general business activity rose from 17.0 in August to 21.3 in September, its fastest pace since February. Overall, the data reflect continued progress in the Texas economy, buoyed by a recovery in the energy sector most importantly. One year ago, the headline index was -2.1, and year-to-date through the first three quarters of 2017, it has averaged 18.6, illustrating significant improvements over the past 12 months. In September, the underlying data were mixed but still encouraging overall. This included new orders (up from 14.3 to 18.6), production (down from 20.3 to 19.5), shipments (up from 18.1 to 27.4), employment (up from 9.9 to 16.3), hours worked (up from 14.5 to 18.4) and capital expenditures (down from 14.5 to 13.6). Nearly 54 percent of respondents said that new orders had increased for the month, with the measure for hours worked at its highest point since November.

Moving forward, manufacturing leaders remained very positive about the next six months, with the forward-looking measure increasing from 29.2 to 34.5. More than 55 percent of those completing the survey felt that production would rise in the coming months, and 45.4 percent and 34.6 percent anticipate more hiring and capital spending, respectively. At the same time, pricing pressures for raw materials (up from 26.0 to 35.9) were also anticipated to accelerate somewhat.

New York Fed: Manufacturing Activity Growth Remained Strong in September

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The Empire State Manufacturing Survey continued to reflect strong growth in the sector in September. The composite index of general business conditions remained highly elevated despite easing from 25.2 in August, its highest level in nearly three years, to 24.4 in September. Encouragingly, there were faster paces of expansions in September for new orders (up from 20.6 to 24.9), shipments (up from 12.4 to 16.2) and employment (up from 6.2 to 10.6). The shift for new orders stemmed mostly from a decline in the percentage of respondents saying that their sales had declined relative to the month before, down from 21.5 percent in August to 13.7 percent in September. In this release, 38.7 percent said that new orders had risen for the month, down from 42.0 percent. Beyond those measures, the average workweek (down from 10.9 to 5.7) increased at a softer rate in September, but pricing pressures (up from 31.0 to 35.8) accelerated.

Meanwhile, manufacturers in the New York Federal Reserve Bank’s district remained upbeat about the next six months despite most of the forward-looking gauge pulling back a little in this report. The expectations composite index decreased from 45.2 to 39.3 but continued to suggest strong growth for the months ahead. More than 55 percent of those completing the survey predict better new orders over the next six months, with 26.0 percent and 32.5 percent anticipating increased hiring and capital spending, respectively. Technology spending (up from 9.3 to 17.1) also picked up.

Manufacturing Production Disappointed in August

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The Federal Reserve said that manufacturing production fell 0.3 percent in August, pulling back from being flat in July and declining for the first time since May. We have seen a lot of volatility in the output data for the manufacturing sector since the spring—essentially seesawing from month to month since March. This has meant that production has grown been less than we would have desired or expected, especially given the more-robust outlook seen in other data sources. In the August data, though, the main culprit was Hurricane Harvey, which the Federal Reserve estimates reduced production by 0.75 percent in August.

Yet, even with that weakness, the longer-term trend for output among manufacturers has been encouraging. Over the course of the past 12 months, manufacturing production has risen 1.5 percent. It was the tenth consecutive positive year-over-year reading for manufacturing output and definite progress from decline of 0.6 percent year-over-year seen in August 2016. Similarly, manufacturing capacity utilization decreased from 75.6 percent in July to 75.3 percent in August. Utilization rates have trended lower since peaking at 75.9 percent in April, but capacity continues to exceed the 74.7 percent rate seen at this time last year.

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NFIB: August Small Business Optimism Index Rose to Its Highest Level in Six Months

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The National Federation of Independent Business (NFIB) said that the Small Business Optimism Index edged up from 105.2 in July to 105.3 in August, its highest level since February. The headline index has rebounded from June’s 103.6 pace, which was a post-election low—albeit one that still represented a highly positive outlook. Overall confidence remained not far from January’s assessment (105.9), with was a 12-year high. To illustrate the boost in optimism seen over the past 12 months, the headline index stood at 94.4 one year ago. Along those lines, the percentage of respondents suggesting that the next three months would be a “good time to expand” increased from 23 percent to 27 percent. In August 2016, just 9 percent said the same thing. Read More

ISM: Manufacturing Activity Expanded at a Six-Year High in August

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The Institute for Supply Management (ISM) reported that manufacturing activity grew robustly in August, expanding at its fastest pace since April 2011. The ISM Manufacturing Purchasing Managers’ Index (PMI) increased from 56.3 in July to 58.8 in August. The sample comments tended to echo the strong data, with mostly positive feedback from respondents on healthy gains in sales and an optimistic business outlook. Along those lines, the indices for new orders (down from 60.4 to 60.3) and production (up from 60.6 to 61.0) exceeded 60 for the third straight month (and seven of the past nine months), illustrating strong growth in demand and output in the sector overall. In contrast, one year ago, the manufacturing sector contracted slightly with the headline PMI at 49.4, and since then, we have seen tremendous progress. Read More

NFIB: Small Business Optimism Index Rebounded in July to a Five-Month High

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The National Federation of Independent Business reported that the Small Business Optimism Index rebounded, up from 103.6 in June to 105.2 in July. The previous reading had been a post-election low—albeit one that still represented a highly positive outlook—and the new one was the highest since February. Overall confidence remained not far from January’s assessment (105.9), which was a 12-year high. To illustrate the boost in optimism across the past 12 months, the headline index stood at 94.6 one year ago. Along those lines, the percentage of respondents suggesting that the next three months would be a “good time to expand” increased from 21 percent to 23 percent. In July 2016, just 8 percent said the same thing. Read More

ISM: Manufacturing Activity Expanded Strongly in July but Eased from June’s 34-Month High

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The Institute for Supply Management (ISM) said that manufacturing activity continued to expand strongly in July, even as it pulled back from nearly a three-year high in June. The ISM Manufacturing Purchasing Managers’ Index (PMI) decreased from 57.8 in June, its strongest reading since August 2014, to 56.3 in July. Despite some easing in many of the key measures in this survey, the underlying data reflect healthy expansions in demand and output, with manufacturers mostly upbeat in their outlook. The sample comments tend to echo these sentiments, noting strong sales, exports and profits. In addition, better growth in the sector has exacerbated workforce challenges, with one respondent suggesting, “Labor shortages are pretty universal, leading to longer lead times through the supply chain.” Read More

Dallas Fed: Growth in Manufacturing Activity Remained Strong in July

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The Dallas Federal Reserve Bank reported that manufacturing activity remained strong in July. The composite index of general business activity increased from 15.0 in June to 16.8 in July, expanding for the 10th straight month. Overall, the data reflect some progress in the Texas economy, with the headline index jumping from an average of 4.0 in the second half of 2016 to 18.5 through the first seven months of 2017. Despite the optimism in the headline number, the sample comments provided mixed assessments of the current economic climate, with two respondents suggesting their activity was “good, not great.” Another referred to it as the “summertime blues.” Yet, the majority remained mostly positive in their outlook even as they grapple with challenges ranging from foreign competition to difficulties in identifying qualified workers. Read More

Kansas City Fed: Manufacturing Activity Continued to Expand Modestly in July

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The Kansas City Federal Reserve Bank said that manufacturing activity expanded for the eighth straight month and continued to expand at a modest pace in July. With that said, the composite index of general business conditions edged down from 11 in June to 10 in July. The underlying data were mixed. On the positive side, new orders (up from 4 to 10) grew at a faster pace for the month to its best reading since March, and hiring (unchanged at 15) remained strong. Yet, other measures slowed, including production (down from 23 to 4) and the average workweek (down from 7 to 1). Nonetheless, shipments (down from 23 to -2) slipped into contraction for the first time in one year, and exports (down from 3 to -2) dropped for only the second time this year. The sample comments tended to mirror these differing views, ranging from signs of optimism in terms of sales to other respondents citing caution on capital spending and lingering challenges in identifying quality labor candidates. Read More