NAM: Monday Economic Report

  • Manufacturing production continued to disappoint, falling for the third time in the past four months, with output in the sector down 0.5 percent in April. This suggests that slowing global activity has taken its toll so far in 2019. Indeed, manufacturing production has declined 0.2 percent since April 2018, the first negative year-over-year reading since October 2016.
  • Looking ahead, the current forecast is for manufacturing production (NAICS) to rise 1.4 percent in 2019, down from 2.7 percent in 2018 (see the attached graph). This would suggest some improvement in output data in the coming months, but perhaps at a pace that remains softer than desired.
  • More encouragingly, regional economic surveys from the New York and Philadelphia Federal Reserve Banks point to improvements in manufacturing activity in May, and respondents feel upbeat about the next six months.
  • New housing starts rose 5.7 percent in April, increasing for the second straight month to an annualized 1,235,000 units. Single-family and multifamily starts both increased for the month. With that said, new residential construction starts have fallen 2.5 percent over the past 12 months, illustrating ongoing challenges in the sector.
  • Moving ahead, I expect 1.32 million housing starts for 2019, which would indicate a modest rebound from current levels. For their part, builders feel optimistic about sales over the next six months. Mortgage rates, which fell to 4.07 percent for a 30-year fixed-rate loan on average, are essentially the lowest since January 2018, which should help boost demand.
  • Consumer sentiment rebounded in preliminary data to the best reading since January 2014, with Americans feeling more upbeat in their economic outlook. With that said, the University of Michigan and Thomson Reuters noted that survey responses largely pre-dated the latest news on ongoing trade negotiations, which could be reflected in the final data out on May 31.
  • Meanwhile, retail sales decreased 0.2 percent in April, falling for the third time in the past five months. Overall, the data suggest that consumers have continued to be hesitant in their purchasing so far in 2019, but over the past 12 months, spending has risen a modest 3.1 percent.
  • Virginia created the most net new manufacturing jobs in April, adding 2,100 workers, and Texas saw the greatest job gains in the sector over the past 12 months (up 31,600). Meanwhile, Vermont had the lowest unemployment rate in the nation in April at 2.2 percent.