NAM Monday Economic Report – December 8, 2014

These reports suggest that accelerating growth in demand and output is beginning to translate into healthier employment and construction figures, with businesses stepping up investments, perhaps as a sign of confidence. This should bode well for manufacturing employment as we move into 2015. In particular, the Institute for Supply Management’s (ISM) manufacturing Purchasing Managers’ Index (PMI) remains strong, despite edging marginally lower in November. For instance, the production index has now been 60 or higher, which indicates robust expansionary levels, for seven straight months. Similarly, the new orders index has been 60 or higher for five consecutive months, and the export measure also noted some improvements for the month.

Speaking of exports, the U.S. trade deficit changed little in October, edging marginally lower from the month before. Still, growth in goods exports was somewhat better than the headline figure suggested, with the value of petroleum exports declining on lower crude oil costs. The good news is that year-to-date manufactured goods exports have increased to each of our top-five trading partners so far this year. Yet, growth in manufactured goods exports remains sluggish through the first 11 months of 2014, up just 1.1 percent relative to the same time frame in 2013. Not surprisingly, challenges abroad continue to dampen our ability to grow international sales.

New factory orders have declined for the third straight month, a disappointing figure particularly given the strength seen in other measures. In addition, the NAM/IndustryWeek survey noted that the expected pace of exports decelerated once again, mirroring the slow growth in manufactured goods exports noted above. The survey also found that manufacturers remain frustrated with Washington, particularly regarding rising health care costs and regulatory burdens. At the same time, nearly 65 percent were more optimistic that policymakers would address our long-term challenges in light of the midterm election results.

This week, we will get a sense of whether Americans are more willing to open their pocketbooks. Recent indicators have suggested that the public remains quite cautious, despite economic progress and lower gasoline prices, and there have been mixed reports on holiday spending to date. November retail sales figures—due out on Thursday—should provide more details. Other highlights for the week include the latest data on consumer confidence, job openings, producer prices and small business optimism.

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