NAM: Monday Economic Report

  • Manufacturing production declined 0.6% in October, extending the 0.5% loss in September and falling for the seventh time year to date. The latest decrease was led by a sharp decline in motor vehicles and parts production, down 7.1% and negatively impacted by the strike at General Motors. Excluding motor vehicles and parts, manufacturing production fell 0.2% for the second straight month.
  • With that said, the November manufacturing production data will likely reflect a rebound in both motor vehicle and parts production and in the headline indices, with the GM strike now settled.
  • Overall, the data continue to reflect struggles in the manufacturing sector related to weaker global growth and trade uncertainties. Manufacturing production has fallen 1.5% over the past 12 months, for instance, declining on a year-over-year basis for the fourth consecutive month.
  • Meanwhile, total industrial production also declined, down 0.8% in October on reduced manufacturing, mining and utilities output. Industrial production has fallen 1.1% over the past 12 months, and total capacity utilization declined from 77.5% to 76.7%, the lowest since September 2017.  
  • For its part, manufacturing activity in the New York Federal Reserve Bank’s district expanded for the fifth straight month in November, although at a slower pace, with survey respondents positive in their outlook for the next six months.
  • Retail sales increased 0.3% in October, bouncing back from the 0.3% decline in September, with a modest 3.1% rise over the past 12 months. In addition, spending grew 3.7% year-over-year with motor vehicles and gasoline station sales excluded. As such, consumer spending has continued to be a bright spot in the economy over the past year, even as it has also been clear that Americans have slowed their spending year to date.
  • Federal Reserve Chair Jerome Powell testified before Congress that the Federal Open Market Committee is likely to pause before making additional moves as it assesses incoming data. After reducing short-term interest rates three times over the course of the past three meetings, the FOMC sees “the current stance of monetary policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook of moderate economic growth, a strong labor market and inflation near our symmetric 2 percent objective.”
  • On that note, the Federal Reserve’s preferred measure of inflation is the personal consumption expenditures deflator, and using that indicator, core price growth has remained below the FOMC’s stated goal of 2% for nine straight months, up 1.3% year-over-year in September.
  • Similarly, producer prices for final demand goods and services have decelerated significantly in recent months, up just 1.0% year-over-year in October and the lowest since September 2016. In addition, core producer prices have grown 1.5% year-over-year, the slowest pace since October 2016.
  • In contrast, consumer prices rose 0.4% in October, the fastest monthly pace since March, with 1.8% growth year-over-year. At the same time, core inflation (which excludes food and energy) increased 0.2% in October, with 2.3% growth over the past 12 months.