09252020Fri
Last updateWed, 23 Sep 2020 9pm

Mid-America Business Conditions at Two-Year High

The August Creighton University Mid-America Business Conditions Index advanced above growth neutral, and to its highest level in two years. After falling below growth neutral for three straight months, the overall index bounced into positive territory for June, July, and August.

“While the August reading was certainly encouraging, manufacturing activity in the region remains below pre-COVID-19 levels. Creighton’s regional index has been mirroring the national ISM index with reading above growth neutral for June and July. I expect the national number to be above growth neutral for August when it is released later this morning,” said Ernie Goss, PhD, director of Creighton University’s Economic Forecasting Group.


Leading Economic Indicators Up, Still at Recession Levels

The Conference Board Leading Economic Index (LEI) for the U.S. increased 1.2% in August to 106.5, following a 2.0% increase in July and a 3.1% increase in June.

“While the U.S. LEI increased again in August, the slowing pace of improvement suggests that this summer’s economic rebound may be losing steam heading into the final stretch of 2020,” said Ataman Ozyildirim, senior director of economic research at The Conference Board. “Despite the improvement, the LEI remains in recession territory, still 4.7% below its February level. Weakening in new orders for capital goods, residential construction, consumers’ outlook, and financial conditions point to increasing downside risks to the economic recovery. Looking ahead to 2021, the LEI suggests that the US economy will start the new year under substantially weakened economic conditions.”

U.S. Manufacturers' and Trade Shipments Down in July

According to the Department of Commerce, the combined value of distributive trade sales and manufacturers’ shipments for July, adjusted for seasonal and trading day differences but not for price changes, was estimated at $1,441.1 billion, up 3.2% (±0.2%) from June 2020, but was down 1.2% (±0.4%) from July 2019.

Manufacturers’ and trade inventories for July, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,914.3 billion, up 0.1% (±0.1%) from June 2020, but were down 5.9% (±0.3%) from July 2019.

U.S. Industrial Production Growth Slowed in August

Industrial production rose 0.4% in August for its fourth consecutive monthly increase. However, even after the recent gains, the index in August was 7.3% below its pre-pandemic February level. Manufacturing output increased 1.0% in August. After falling 20.3% between February and April, factory production has rebounded; even so, in August it was still 6.7% below its February level. The index for durable manufacturing rose 0.7%, as a decline in the output of motor vehicles and parts was more than offset by broad-based increases for other durable goods industries.

NAM Survey Shows Partial Rebound in Optimism

The National Association of Manufacturers has released its third-quarter Manufacturers’ Outlook Survey. Of the 82.7% of respondents who say COVID-19 had or will have a negative impact on their cash flow, 72.1% noted they had obtained funds through the Paycheck Protection Program, Main Street Lending Program or other liquidity programs, especially small manufacturers. Of those firms taking advantage of such programs, 91.6% reported that those funds helped keep their business afloat, retain their workforce or meet other necessary expenses.

Manufacturing optimism has also rebounded to 66% since the second quarter of 2020, where it hit the worst reading since the Great Depression. Still, the outlook remains below the historical average of 74.4%, and 62% of manufacturers expect their firm’s revenues will not get back to pre-COVID-19 levels until 2021 or later.

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