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Manufacturing & The Economy

Fed Beige Book Shows Improved Growth

Reports from the twelve Federal Reserve Districts suggest economic activity increased in most regions of the country since the previous report. The expansion was characterized as modest or moderate by the Boston, Philadelphia, Richmond, Atlanta, Minneapolis, Kansas City, Dallas and San Francisco Districts. Chicago reported that economic growth had picked up, and New York and Philadelphia indicated that business activity had rebounded from weather-related slowdowns earlier in the year. The Cleveland and St. Louis Districts both reported a decline in economic activity.

Manufacturing improved in most Districts. Several Districts reported that the impact of winter weather was less severe than earlier this year. Chicago and Minneapolis saw moderate growth, while manufacturing grew at a steady pace in New York, Atlanta, St. Louis, and Dallas. San Francisco noted that manufacturing appeared to gain some momentum. Other Districts noted mild growth, except Richmond, where manufacturing activity was mixed. 

Industrial Production Increased in March, February Revised Up

Industrial production increased 0.7% in March after having advanced 1.2% in February, the Federal Reserve reports. The rise in February was higher than previously reported primarily because of stronger gains for durable goods manufacturing and for mining. For the first quarter as a whole, industrial production moved up at an annual rate of 4.4%, just slightly slower than in the fourth quarter of 2013.

In March, manufacturing production recorded an increase of 0.5%; factory output rose 1.4% in February, 0.5% faster than previously reported. For the first quarter, the index for manufacturing increased at an annual rate of 1.7%, with similarly sized gains for durables and nondurables. The factory operating rate moved up 0.2% in March to 76.7%, a rate 2.0% below its long-run average. 

Factory Orders Rise 1.6% in February, Exceeds Estimates

New orders for manufactured goods in February, up following two consecutive monthly decreases, increased $7.5 billion or 1.6% to $488.8 billion, the U.S. Census Bureau reported. This followed a 1.0% January decrease. Economists predicted an increase of 1.2%.

New orders for manufactured durable goods in February, up following two consecutive monthly decreases, increased $4.9 billion or 2.2% to $229.1 billion, unchanged from the previously published increase. This followed a 1.4% January decrease. 

Manufacturing Technology Orders Down in February

February U.S. manufacturing technology orders (USMTO) totaled $354.40 million according to the Association for Manufacturing Technology (AMT). This total, as reported by companies participating in the USMTO program, was down 6.6% from January and down 6.2% when compared with the total of $377.82 million reported for February 2013. With a year-to-date total of $733.82 million, 2014 is down 0.6% compared with 2013.

“A soft first quarter was expected for technology orders, and in this case further challenged by a harsh winter,” said AMT President Douglas K. Woods. “Many key industry forecasts indicate growth for manufacturing through the end of the year. With the average age of capital equipment at almost 22 years and interest rates continuing to stay low, the environment is ripe for investment in manufacturing technology.” 

ISM: Manufacturing Activity Expanded Faster in March

Manufacturing expanded in March as the PMI registered 53.7%, an increase of 0.5% when compared to February's reading of 53.2%. A reading above 50% indicates that the manufacturing economy is generally expanding; below 50% indicates that it is generally contracting.

A PMI in excess of 43.2%, over a period of time, generally indicates an expansion of the overall economy. Therefore, the March PMI indicates growth for the 58th consecutive month in the overall economy, and indicates expansion in the manufacturing sector for the 10th consecutive month.

Of the 18 manufacturing industries, 14 are reporting growth in March in the following order: Petroleum & Coal Products; Transportation Equipment; Furniture & Related Products; Paper Products; Printing & Related Support Activities; Plastics & Rubber Products; Fabricated Metal Products; Machinery; Textile Mills; Computer & Electronic Products; Nonmetallic Mineral Products; Food, Beverage & Tobacco Products; Chemical Products; and Primary Metals. The four industries reporting contraction in March are: Apparel, Leather & Allied Products; Wood Products; Electrical Equipment, Appliances & Components; and Miscellaneous Manufacturing. 

U.S. Inventories Up 0.4% in February

The U.S. Census Bureau announced Monday that the combined value of distributive trade sales and manufacturers’ shipments for February, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,311.8 billion, up 0.8% (±0.2%) from January 2014 and were up 1.8% (±0.5%) from February 2013.

Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,715.6 billion, up 0.4% (±0.1%) from January 2014 and up 4.2% (±0.5%) from February 2013.

The total business inventories/sales ratio based on seasonally adjusted data at the end of February was 1.31. The February 2013 ratio was 1.28.  

MAPI: Manufacturing Production to Grow 3.2% in 2014, 4.0% in 2015

A number of key factors indicate that manufacturing has potential for solid growth through 2015, according to the quarterly Manufacturers Alliance for Productivity and Innovation (MAPI) U.S. Industrial Outlook, a report that analyzes 27 major industries.

Manufacturing industrial production increased at a 4.7% annual rate during the fourth quarter of 2013 before flattening out in the first quarter of 2014. Inflation-adjusted GDP decelerated to a 2.6% percent annual rate in the fourth quarter and will likely be less than 2% in the first quarter of 2014. Both declines, however, are anticipated to be short-lived.

Manufacturing production increased 2.3% in 2013. MAPI forecasts growth of 3.2% in 2014, an advance from the 3.1% forecast in the December 2013 report. The momentum is likely to continue in 2015, with growth forecast to be 4.0%, down only slightly from 4.1% from the previous report. 

NAM Monday Economic Report – April 14, 2014

In the minutes of its March Federal Open Market Committee (FOMC) meeting, the Federal Reserve Board highlighted the negative impact of weather events on first-quarter growth. Winter storms hampered business investment, construction, consumer spending and manufacturing production. Nonetheless, the Federal Reserve still anticipates real GDP growth of between 2.8 and 3.0 percent in 2014, faster than last year’s 1.9 percent expansion. While this reflects a slight downgrade in the outlook for the year from the last forecast, it continues to suggest that the economy will regain its momentum moving forward. The Federal Reserve also predicts growth of 3.0 to 3.2 percent in 2015. The International Monetary Fund’s World Economic Outlook, which was released last week, mirrors these figures in its own forecasts for the United States.

The highlight of the FOMC minutes was the background discussion among participants regarding future monetary policy actions. The Federal Reserve largely feels that the U.S. labor market has a lot of “slack” in it, which is not reflected by the 6.7 percent unemployment rate. Despite improvements in the unemployment rate, weaknesses continue, with the participation rate near 30-year lows and high rates of both underemployment and part-time employment. While some FOMC members feel there has been sufficient economic progress to warrant less stimulative monetary policy measures, the majority view the current labor market as sufficiently weak enough to continue the Federal Reserve’s highly accommodative actions for the foreseeable future. The Federal Reserve will continue to reduce its long-term asset purchases, but short-term interest rates will likely not rise until next year at the earliest. Inflationary pressures remain modest, providing the Federal Reserve with some wiggle room to do its stimulative measures.

The most recent Job Openings and Labor Turnover Survey (JOLTS) data suggest the labor market for manufacturers remains soft. The number of manufacturing job openings declined for the third month in a row in February. Postings have been lower since peaking in November, and the December to February time frame mirrored the weather-related weaknesses seen in other data. Net hiring was also lower in those three months, with 2,000 more separations than hires in February. Still, the manufacturing sector has added an average of 12,125 workers each month since August, mirroring the uptick in demand and production that we have seen since that point. We are hopeful that hiring begins to accelerate again in the coming months.

Looking at the sentiment surveys last week, businesses and consumers were more upbeat. The California Manufacturing Survey from Chapman University reported rising expectations for new orders and production for the second quarter, but with employment growth remaining soft. Both durable and nondurable goods activity were anticipated to expand modestly in the current quarter. Likewise, small business owners in the National Federation of Independent Business’ (NFIB) survey were more optimistic about future sales, and those saying the next three months were a good time to expand edged marginally higher. Still, earnings remained weak, and the percentage suggesting they would bring on more workers moved lower. The University of Michigan and Thomson Reuters also noted improved consumer sentiment, a welcome gain after three months of dampened enthusiasm.

This week will be a busy one on the economic front, specifically with new reports on housing starts and industrial production. We hope to move beyond the weather-related weaknesses from earlier this year, and March’s manufacturing output numbers are expected to show a continued rebound. Similarly, housing starts moved slightly higher in February, but permits surpassed the 1 million mark for the first time since November; yet, rising interest rates, financial challenges for potential buyers and low inventory remain concerns. Other highlights this week include new data on consumer prices, leading indicators, manufacturing surveys from the New York and Philadelphia Federal Reserve Banks and state employment.

Chad Moutray is the chief economist, National Association of Manufacturers. Note that General Electric Chief Economist Marco Annunziata will prepare the Monday Economic Report for April 21. 

NAM Monday Economic Report – March 31, 2014

The U.S. economy grew 2.6 percent in the fourth quarter, according to the most recent revision, and for 2013 as a whole, real GDP growth was a rather lackluster 1.9 percent. Consumer spending, business investment and net exports were bright spots in the fourth quarter, with reduced government spending subtracting nearly one percentage point from growth.

Meanwhile, business economists predict real GDP growth of 2.8 percent on average for 2014, with 1.9 percent growth in the current quarter. (My own forecast is marginally higher for both, up 3.0 percent for the year and 2.1 percent for the first quarter of 2014.) Weather-related slowdowns account for the deceleration in activity, particularly for manufacturers, in the current quarter. However, modest growth is expected to resume once temperatures warm up, and we have already begun to see that. The National Association for Business Economics (NABE) Outlook Survey also suggested that the industry should grow 3.2 percent in 2014 and 3.4 percent in 2015, which would indicate a pickup from the current pace.

The latest manufacturing surveys show a rebound in sentiment after softness from December to February. The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) slowed a bit, down from 57.1 in February to 55.5 in March. Despite the lower figure, new orders and production growth continued to grow relatively strongly, with overall manufacturing activity improved from January’s winter storms. A similar recovery was seen in regional data from the Kansas City Federal Reserve Bank, mirroring the findings from New York and Philadelphia the week before. Still, not everyone has seen improvements yet. The Richmond Federal Reserve reported lackluster growth in sales and output, with weather continuing to “wreak havoc” for many manufacturers. In addition, while new durable goods orders were up a strong 2.2 percent in February, sales growth increased at the less-than-robust rate of just 0.2 percent when transportation orders were excluded.

On the consumer front, the data were mostly positive, but with some caveats. Personal income and spending both increased 0.3 percent in February, with each rising 3.0 percent over the past 12 months. This was a decent pace, but increased purchases of nondurable goods and services mainly fueled spending growth in February. Durable goods spending declined for the third month in a row. In terms of consumer confidence, the two reports out last week were mixed. The Conference Board’s measure of consumer sentiment reached a six-year high; yet, labor market worries dampened enthusiasm for the current environment. Likewise, the University of Michigan and Thomson Reuters reported that consumer sentiment edged lower in March, with employment and income growth also weighing on respondents’ minds. In both surveys, however, Americans are more confident today than in the fall during the government shutdown.

Looking overseas, Markit released preliminary manufacturing PMI data for China and the Eurozone. Chinese manufacturing activity has now contracted for three consecutive months, with March’s pace being the slowest since July. The data mirror other recent indicators, including industrial production, fixed asset investment and retail sales, which have slowed. As such, they all suggest that real GDP might fall below the 7.7 percent rate in the fourth quarter. (First-quarter real GDP for China will be released on April 15.) Meanwhile, European manufacturers have seen expanding activity levels for nine straight months, even as Eurozone PMI values eased slightly in March. New orders and production remain strong in Germany, and, of note, French manufacturers were positive in their sentiment for the first time since June 2011.

This week, the focus will be on the March jobs numbers, which will come out on Friday. The consensus expectation is for nonfarm payroll growth of around 190,000, with manufacturers hiring somewhere near the 12,000 average experienced in the sector since August. In addition, the Institute for Supply Management (ISM) is expected to show a slight rebound in manufacturing PMI activity in its March data, up from 53.2 in February. Other highlights this week include the latest data on construction spending, factory orders and international trade.

Chad Moutray is the chief economist, National Association of Manufacturers

New Jobless Claims at 7 Year Low

In the week ending April 5, the advance figure for seasonally adjusted initial claims was 300,000, a decrease of 32,000 from the previous week's revised level. Economists predicted the number to be between 310,000 and 330,000. The last time initial claims were this low was May 12, 2007 when they were 297,000. The previous week's level was revised up by 6,000 from 326,000 to 332,000. The 4-week moving average was 316,250, a decrease of 4,750 from the previous week's revised average. The previous week's average was revised up by 1,500 from 319,500 to 321,000. There were no special factors influencing this week's initial claims. 

Durable Goods Orders Up 2.2% in February

New orders for manufactured durable goods in February increased $5.0 billion or 2.2% to $229.4 billion, the U.S. Census Bureau announced Wednesday. This increase, up following two consecutive monthly decreases, followed a 1.3% January decrease. Excluding transportation, new orders increased 0.2%. Excluding defense, new orders increased 1.8%.

Shipments of manufactured durable goods in February, up following two consecutive monthly decreases, increased $2.0 billion or 0.9% to $234.0 billion. This followed a 0.6% January decrease.

Inventories of manufactured durable goods in February, up ten of the last eleven months, increased $3.2 billion or 0.8% to $392.3 billion. This was at the highest level since the series was first published on a NAICS basis, and followed a 0.3% January increase. 

More Jobs Open in February Than Any Time Since Early 2008

 There were 4.2 million job openings in February, up from 3.9 million the previous month. The 4.2 million openings are the highest since January 2008. The number rose for total private and was little changed for government. The number of job openings increased in retail trade and in professional and business services, while the number of job openings decreased in arts, entertainment, and recreation. The South region experienced a rise in job openings in February.

Over the year, the number of job openings increased in three industries and decreased in three industries. The Midwest and West regions experienced an increase in the number of job openings over the 12 months ending in February. 

U.S. Companies’ Equipment Borrowing Up 15% from Last Year

The Equipment Leasing and Finance Association’s (ELFA) Monthly Leasing and Finance Index (MLFI-25), which reports economic activity from 25 companies representing a cross section of the $827 billion equipment finance sector, showed their overall new business volume for February was $5.4 billion, up 15% from new business volume in February 2013. Month-over-month, new business volume was down 10% from January. Year to date, cumulative new business volume increased 8% compared to 2013.

“This month’s increase in financing activity reflects a strengthening economy evidenced by a resilient housing market trying to return to pre-recession levels, moderate GDP growth and an improving jobs picture. It is too early to tell whether the positive economic momentum created in the first two months of the year will be sustainable for the balance of 2014, particularly as Fed policy begins to push up long-term interest rates and geopolitical headwinds emerge anew in Eastern Europe. Credit markets continue to perform well,” said said ELFA President and CEO William G. Sutton.   

IMF: Global Economy to Grow 3.6% in 2014

The global recovery is becoming broader, but the changing external environment poses new challenges to emerging market and developing economies, says the IMF’s latest World Economic Outlook (WEO).

The IMF forecasts global growth to average 3.6% in 2014―up from 3% in 2013―and to rise to 3.9% in 2015.

The strengthening of the recovery from the Great Recession in the advanced economies is a welcome development, according to IMF staff. But the latest WEO also emphasizes that growth remains subpar and uneven across the globe.

In this setting, the global economy is still fragile despite improved prospects, and important risks—both old and new—remain. Risks identified previously include finishing the financial sector reform agenda, high debt levels in many countries, stubbornly high unemployment, and concerns about emerging markets. 

Manufacturers Saw Robust Profit Growth in Fourth Quarter 2013

On Monday the Commerce Department reported that U.S. manufacturing corporations’ seasonally adjusted after-tax profits in the fourth quarter of 2013 totaled $159.4 billion, up $8.7 (±0.7) billion from the after-tax profits of $150.7 billion recorded in the third quarter of 2013, and up $23.4 (±0.3) billion from the after-tax profits of $136.0 billion recorded in the fourth quarter of 2012.

Seasonally adjusted sales for the quarter totaled $1,715.6 billion, up $17.4 (±11.9) billion from the $1,698.3 billion recorded in the third quarter of 2013, and up $37.6 (±5.6) billion from the $1,678.0 billion recorded in the fourth quarter of 2012.

Durable goods manufacturers’ seasonally adjusted after-tax profitsin the fourth quarter of 2013 totaled $81.9 billion, up $5.9 (±0.4) billion from the after-tax profits of $76.0 billion recorded in the third quarter of 2013, and up $21.9 (±0.1) billion from the after-tax profits of $60.0 billion recorded in the fourth quarter of 2012. 

U.S. Trade Deficit Rises to $42.3 Billion

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced that total February exports of $190.4 billion and imports of $232.7 billion resulted in a goods and services deficit of $42.3 billion, up from $39.3 billion in January, revised.

February exports were $2.0 billion less than January exports of $192.5 billion. February imports were $1.0 billion more than January imports of $231.7 billion.

In February, the goods deficit increased $2.2 billion from January to $61.7 billion, and the services surplus decreased $0.8 billion from January to $19.4 billion. Exports of goods decreased $2.0 billion to $131.7 billion, and imports of goods increased $0.2 billion to $193.4 billion. Exports of services were virtually unchanged at $58.7 billion, and imports of services increased $0.8 billion to $39.3 billion.

The goods and services deficit decreased $1.0 billion from February 2013 to February 2014. Exports were up $3.6 billion, or 1.9%, and imports were up $2.6 billion, or 1.1%.

The January to February decrease in exports of goods reflected decreases in industrial supplies and materials ($2.7 billion) and capital goods ($0.9 billion). 

Strong Manufacturing Output Growth Continues in March

U.S. manufacturing business conditions continued to improve at the end of the first quarter, as highlighted by the Markit Flash U.S. Manufacturing PMI registering 55.5 in March. The index, which is based on approximately 85% of usual monthly replies, was down from 57.1 in February but still the second-highest since January 2013. Reports from survey respondents cited improving economic fundamentals and, to a lesser degree, an on-going catch-up effect following weather disruptions earlier in the year.

U.S. Manufacturing PMI posted 55.4 on average over the first quarter of 2014, up from 53.8 in Q4 2013, to suggest that the sector remains on a solid growth trajectory. March data indicated that the overall index was supported by sharp rises in output (57.5) and new business (58.0).

Growth of manufacturing production was only slightly less marked than the near-three year high registered in February. Manufacturers noted that higher levels of output reflected rising volumes of new work and on-going efforts to reduce backlog accumulation at their plants. The latest increase in work-in-hand (but not yet completed) was less steep than the survey-record high seen in February, suggesting that some companies have started to fulfil orders that were disrupted by adverse weather earlier in the year. 

NAM Monday Economic Report – April 7, 2014

Manufacturers appear to be recovering from softness in the first two months of the year, mainly due to the number of severe winter storms. The Institute for Supply Management (ISM) reported that its Purchasing Managers’ Index (PMI) edged higher, up from 53.2 in February to 53.7 in March. Production began expanding again, with the pace of new orders and exports picking up slightly. Despite some degree of progress in March, sentiment remains lower than just a few months ago. PMI values averaged 56.3 in the second half of last year, with sales and output measures exceeding 60—indicating strong growth—each month from August to December.

Likewise, new factory orders increased 1.6 percent in February, partially offsetting the sharp declines in December and January. Beyond autos and aircraft, however, durable goods sales were just barely higher, suggesting more needs to be done for broader growth in the sector. Meanwhile, the Dallas Federal Reserve Bank’s manufacturing survey reflected a rebound in activity consistent with other Federal Reserve districts. Texas manufacturers remain positive about sales, output, hiring and capital spending moving forward. For example, more than half of respondents anticipate increased demand over the next six months. Still, some cited regulatory, pricing pressure, workforce and foreign competition concerns.

On the hiring front, Friday’s jobs numbers provided mixed news for manufacturers. The sector lost 1,000 workers in March, mainly due to declines in nondurable goods industries. This was particularly disappointing given consensus expectations that were closer to the ADP’s estimates, which had a gain of 5,000 workers for the month. Yet, revisions to January and February data provided some comfort, adding 15,000 more employees than original estimates. As a result, the longer-term trend for manufacturing did not change much despite March’s lower figure. Manufacturers have added more than 600,000 workers since the end of the recession, and since August, the sector has generated an average of 12,125 net new jobs per month. Another positive in this report was that the average number of hours worked and average compensation both rose, findings that mirror the rebound in overall activity.

Meanwhile, the latest international trade figures were also disappointing. The U.S. trade deficit widened from $39.28 billion in January to $42.30 billion in February. This was the highest deficit since September and the result of a decrease in goods exports and an increase in service-sector imports. Petroleum exports were also marginally lower. The numbers were particularly discouraging given that manufactured goods exports in January and February of this year were 0.6 percent lower than the first two months of last year. Still, outside of softness in our goods exports to Canada, the other top-five export markets for U.S.-manufactured goods registered increases year-to-date in 2014 relative to 2013. In addition, there remains cautious optimism that export sales will improve in the coming months.

This week, the focus will be on the release of the minutes from the March Federal Open Market Committee (FOMC) meeting. The minutes will provide additional insights on the internal debates that led the Federal Reserve Board to continue tapering but to also change its forward guidance for short-term interest rates. On Friday, the release of producer price data should continue to show that overall inflation remains minimal. Other highlights include the latest data on consumer confidence, job openings, small business optimism and wholesale trade.

Chad Moutray is the chief economist, National Association of Manufacturers.

NAM Monday Economic Report – March 24, 2014

Here is the summary for this week’s Monday Economic Report:

For much of the past month, people have been questioning how much of the recent softness in the manufacturing sector was due to weather and how much stemmed from other factors. The data released last week support the view that it was largely weather related, with numerous winter storms keeping shoppers from the stores and closing factories temporarily. Fortunately, manufacturing activity has rebounded in the latest reports. For instance, manufacturing production increased 0.8 percent in February, nearly offsetting January’s 0.9 percent decline, with capacity utilization for the sector rising from 75.9 percent to 76.4 percent. Similar rebounds were seen in the March surveys from the New York and Philadelphia Federal Reserve Banks, and more importantly, manufacturers continue to be mostly upbeat about new orders and shipments over the next six months.

In its monetary policy statement, the Federal Reserve Board’s Federal Open Market Committee (FOMC) acknowledged the negative effects of “adverse weather conditions” on recent activity. It also provided the following evaluation of the current economic environment:

Labor market indicators were mixed but on balance showed further improvement. The unemployment rate, however, remains elevated. Household spending and business fixed investment continued to advance, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable.

The biggest news from the FOMC’s statement was the change in its forward guidance, as expected, to no longer mention an unemployment rate target. Since its December 2012 meeting, the FOMC has said it would pursue a highly accommodative monetary policy until the unemployment rate hit 6.5 percent and/or long-term inflation consistently exceeded 2.0 percent. With unemployment falling, this put the Federal Reserve in a predicament because job growth continues to be a challenge, particularly for the long-term unemployed, and progress in the unemployment rate fails to acknowledge loforw participation rates and underemployment that exists in the labor market. For this reason, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota opposed the change in the Fed’s guidance, and he subsequently said that he wanted a 5.5 percent unemployment rate target.

In the end, however, short-term interest rates cannot hover around zero percent forever, particularly with the U.S. economy improving. The Federal Reserve now forecasts real GDP growth in 2014 of 2.8 percent to 3.0 percent, with the unemployment rate falling to 6.1 percent by year’s end. The FOMC continued to taper its long-term asset purchases, down from $65 billion each month to $55 billion, and short-term interest rates are now expected to start rising sometime in 2015. (This is true even with new Federal Reserve Chair Janet Yellen’s suggestion that rates might begin to increase around six months after quantitative easing ends, a comment that spooked markets on Wednesday.)

Fortunately for the Federal Reserve, inflationary pressures remain minimal, allowing the FOMC to continue its stimulative measures for now. Consumer prices rose 0.1 percent in February, with core inflation increasing 1.6 percent over the past 12 months. Of course, higher interest rates could negatively impact spending, particularly for large consumer items and for business investments.

Along these lines, housing starts have stabilized a little, up from 905,000 annualized units in January to 907,000 in February, but still remain somewhat weak. On the positive side, housing permits—a proxy of future activity—exceeded 1 million for the first time since November, largely on gains in multifamily residential construction. Single-family permitting remained soft, however, and homebuilder sentiment continued to be down from where it was just a few months ago. In addition to weather challenges, National Association of Home Builders (NAHB) Chief Economist David Crowe attributes the current weakness to “a shortage of buildable lots and skilled workers, rising materials prices and an extremely low inventory of new homes for sale.”

Today, we will get March Markit Flash Purchasing Managers’ Index (PMI) data for the United States, China and Eurozone. In particular, economists will be looking to see if Chinese manufacturing activity continues to decelerate and if the slight easing in February’s data was a one-month phenomenon. (For more on international trends, see the latest Global Manufacturing Economic Update, which was released on Friday.) Other highlights this week include updates on consumer confidence, durable goods orders and shipments, GDP, manufacturing surveys from the Kansas City and Richmond Federal Reserve Banks, personal income and spending and state employment.

Chad Moutray is the chief economist, National Association of Manufacturers.

Texas Manufacturing Strengthened Further in March

Texas factory activity increased for the eleventh month in a row in March, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 10.8 to 17.1, indicating output grew at a stronger pace than in February.

Other measures of current manufacturing activity also reflected more robust growth. The new orders index rose to a nine-month high of 14.7, with nearly a third of manufacturers noting an increase in demand and less than a fifth noting a decrease. The shipments index rose from 13.3 to 19.5, posting its strongest reading in nearly four years. The capacity utilization index rose as well, climbing four points to 13.1.

Perceptions of broader business conditions were more optimistic in March. The general business activity index moved up to a six-month high of 4.9 after slipping to zero last month. The company outlook index also rebounded, rising six points to 9.1 after falling sharply in February. 

U.S. Trade Optimism at All-Time High

Trade optimism among U.S. business leaders is at an all-time high and the U.S. is positioned to retain its dominance as a global technology export leader, including in industrial machinery, for the next twenty years, according to research by HSBC.

However, to maintain its supremacy, the U.S. will need to increase research and innovation investment, according to data from the latest HSBC Global Connections Trade Report, which includes the short-term trade trends from the HSBC Trade Confidence Index and mid- and long-term trade outlook from the HSBC Trade Forecast.

The U.S. HSBC Trade Confidence Index rose to 115 from 114 six months earlier, the highest level since its inception, and higher than the global average of 113, driven by stronger global demand and increased private sector confidence. The index is an international survey of small and middle market businesses engaged in cross-border trade including around 250 in the U.S. Unexpectedly strong recovery in leading industrialized nations, including the U.S., has boosted global trade confidence, according to the report.

U.S. wholesalers, retailers and manufacturers were the most optimistic about the six month trade outlook with more than 70% of these sector leaders expecting stronger trade flows. 

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