NAM: Monday Economic Report

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

11-28-report

There was a lot to be thankful for last week, with a number of positive economic indicators to report. Americans appear to be cautiously optimistic about growth moving forward, with consumer confidence rising to a six-month high in November. Respondents to that survey were hopeful in their outlook post-election, giving President-elect Donald Trump a “honeymoon” of sorts in terms of goodwill, at least in the University of Michigan’s survey. Financial markets have also received a significant boost since Election Day, with the Dow Jones Industrial Average (DJIA) surpassing 19,000 for the first time—a new all-time high. This was good news for our portfolios, with the DJIA up nearly 10 percent year to date, or 4.4 percent since the election.

Manufacturing data were also quite promising. This included new durable goods orders, which jumped 4.8 percent in October and have increased 2.1 percent over the past 12 months. With that said, the data were skewed by strong growth in aircraft sales in October, which can be highly volatile from month to month. Excluding transportation, new orders for durable goods increased 1.0 percent in October, but over the past 12 months, growth in activity has been more minimal, up just 0.3 percent. Nonetheless, the healthy gains in this latest report provide some encouragement that the sector has continued on a path toward stabilization.

Along those lines, the Markit Flash U.S. Manufacturing PMI rose to a 13-month high in November, boosted by strong growth in output. New orders, exports and hiring also improved. Given that many manufacturers were rather cautious in their economic outlook over the past two years, this was welcome news. Looking more regionally, the Richmond Federal Reserve Bank reported that manufacturing activity in its district rebounded modestly in November after contracting in four of the prior five months. This largely came from better new orders data. There were positive developments in the labor market as well, with hiring accelerating for the second consecutive month. In addition, respondents were very optimistic about the next six months. This positive growth in activity in November followed similar progress in the Kansas City, New York and Philadelphia districts the week before.

Moreover, this trend was not just in the United States. The Markit Flash Eurozone Manufacturing PMI expanded at its fastest pace since January 2014. As such, the continent’s economy continues to move in the right direction, improving from earlier in the year, with activity accelerating at a modest pace. With that said, manufacturers in Germany and France reported some easing in growth in November, even as the underlying data continue to be quite positive for both.

Meanwhile, there was mixed news on housing last week. Existing home sales rose 2.0 percent in October, extending the 3.6 percent gain in September. There was increased sales in every region of the country, with activity up 5.9 percent over the past 12 months, largely from strength in the single-family segment. Inventories remain low, which is helping to boost median sales prices. In contrast, new single-family home sales declined 1.9 percent in October, with softer sales in every region except for the West. Still, the longer-term trend has been somewhat more encouraging, up 17.8 percent since October 2015.

This week, we will get new jobs market data on Friday. Manufacturing employment growth has been disappointing of late, with hiring down for three straight months and the sector losing 62,000 workers on net year to date. As such, we will be looking for signs of improvement in November. Likewise, we would hope to see stronger growth in demand and production in the latest Institute for Supply Management survey of manufacturers, especially given the jump in confidence in the competing Markit survey described above. The Dallas Federal Reserve Bank will also release its latest results. Other highlights this week include the latest data on construction spending, consumer confidence, personal income and spending and second quarter real GDP.

Chad Moutray, Ph.D., CBE
Chief Economist
National Association of Manufacturers