Thursday, March 5, 2015

Beige Book: Economic Expansion Continues

Economic activities continued to expand across most regions and sectors according to February edition of the Federal Reserve Beige Book of 2015. Most of the 12 districts reported moderate to modest growth.

Banking conditions were mostly positive across the country with overall loan demand increasing in all districts except Kansas City, where loan demand was mixed. Credit quality has remained largely unchanged or has improved since the prior reporting period. Bankers in most Districts reported no change in their own lending standards.

Consumer spending rose in most regions, and optimism about near-term sales is high. Automobile sales also rose in most Districts. Five districts reported increased demand for trucks and SUV’s. Most of the remaining districts expressed optimism for future auto sales.

Employment levels remained stable or grew across sectors in most Districts. Employers in several districts encountered difficulties in filling a variety of skilled positions.

Growth in manufacturing varied across sectors, but generally increased since the last survey. Outlooks in manufacturing are generally positive, with most regions expecting near-term growth. The report did note however that the New York District was less optimistic than others about their near-term outlook, but did not state why.

Although home sales and prices generally increased, construction activity was lower in some Districts, partly due to poor weather conditions.

Weak agricultural conditions contributed to the slowdown in growth of the Kansas City, and Dallas districts. In addition to a decline in oil and natural gas drilling, persistent drought, a stronger dollar and labor disputes at West Coast ports negatively impacted exports from the regions.

Read the Federal Reserve release.

Wednesday, March 4, 2015

Non-Manufacturing ISM Index Edged Up in February

The Non-Manufacturing ISM Report on Business Index was 56.9 in February, 0.2 percentage points above the previous month. Index readings above 50 indicate expansion in the non-manufacturing economy. February was the 61st consecutive month of economic growth. Fourteen industries reported growth in February, while four industries— Mining; Construction; Other Services; and Arts, Entertainment & Recreation—contracted.

The Business Activity Index was 59.4, 2.1 percentage points slower than the previous month. Respondents cited “Improved economic conditions and seasonal opportunities” as reasons for the continued expansion.

The Employment Index was 56.4, 4.8 percentage points higher than the previous month, as 11 industries reported an increase in employment. The New Orders Index was 56.7, 2.8 percentage points slower than January. Respondents reported the continued growth was driven by “New customers driving new orders.”

The Supplier Deliveries Index was 55.0, a single percentage point higher than the previous month. Nine industries reported slower deliveries. Only the mining industry reported faster deliveries.

Prices paid increased for the third time in 32 months, rising from 45.5 to 49.7. Five industries reported a decline in prices and 8 reported an increase.

Read the ISM release

ADP: Private Sector Added 212,000 Jobs in February

According to the ADP National Employment report, the private sector added 212,000 jobs in February, 38,000 fewer than January, as both goods-producing and services sectors experienced decreased growth compared to the previous month. The February report upwardly revised the January and December headline numbers by 37,000 and 22,000 jobs, respectively.

Small businesses, companies with fewer than 49 employees, added 94,000 jobs, 3,000 fewer than in January. Medium businesses, companies with 50 to 499 employees, added 63,000 jobs, 43,000 fewer than in January. Large businesses, companies with greater than 500 employees, added 56,000 jobs in February, up from 47,000 jobs added in January.

Goods-producing employment rose by 31,000 jobs, a 14,000 job decrease from the previous month, as construction and manufacturing added a combined 34,000 jobs, 13,000 fewer than in January.

The service-providing sector employment rose by 181,000 jobs, down from 206,000 in January. The slower growth in the service sector was primarily due to decreased job growth in trade, transportation and utilities sectors, which added 31,000 jobs, 19,000 jobs fewer than last month’s gains. Professional and business services contributed 34,000 jobs, a decline from the 49,000 job gain in January. Financial activities added 20,000 new jobs, an increase from last month’s 15,000, marking the largest gain in that sector since 2006.

Read the ADP release.

Monday, March 2, 2015

Construction Spending Decreased 1.1% (SAAR) in January

Construction spending decreased 1.1% in January to a seasonally adjusted annual rate (SAAR) of $971.4 billion. Year-over-year construction spending increased 1.8%.

Total private construction declined 0.5% to $697.6 billion (SAAR), yet increased 0.5% from the previous year.

Private residential construction increased 0.6% to $351.7 billion (SAAR), as single family construction grew 0.6% and multi-family construction grew 1.9%.

Non-residential construction decreased 1.6% in January, yet was 4.8% above the year-ago level.

Public construction declined 2.6% from December, yet increased 5.1% from the year-ago level.

Read the Census report.

ISM Manufacturing Index Reports Weak Growth

The ISM manufacturing index decreased 0.6 percentage point to 52.9 in February. Respondents cited concern over the West Coast dock slowdown, which negatively impacts exports and import, as well as increases costs. Index readings above 50 indicate expansion in the manufacturing economy. As of February, the index has been expanding for 26 consecutive months, although the pace has declined. Of the 18 manufacturing industries indexed, 12 reported growth in February.

The New Orders Index declined 0.4 percentage point to 52.5, but the Inventory Index increased 1.5 percentage points to 52.5. The gap between New Orders and Inventories—a proxy for future production—narrowed 1.9 points to zero.

The Employment Index decreased 2.7 percentage points to 51.4. This is the 21st consecutive quarter of growth in employment. Ten of the 18 manufacturing industries indexed reported growth in employment. Four industries reported a decrease: Textile Mills; Computer & Electronic Products; Transportation Equipment; and Chemical Products.

Exports declined 1.0 percentage point to 48.5, contracting after growing for the second consecutive month. Imports decreased 1.5 percentage points to 54.0.

Prices were unchanged at 35.0. This is the fourth month in a row that the price of raw materials is decreasing.

Read the ISM release.

Consistent Personal Income Growth, Decreased Consumption

Personal income increased $50.8 billion, or 0.3%, in January according to the Bureau of Economic Analysis, consistent with the previous month. Personal consumption expenditures (PCE) decreased $18.9 billion, or 0.3%, after a 0.3% decrease in December.

Disposable personal income — personal income less personal current taxes — increased $52.6 billion, or 0.4% in January.

The personal savings rate rose 0.5 percentage points to 5.5%.

The price index for PCE decreased 0.5% in January, compared with a 0.2% decrease in December. The PCE price index, excluding food and energy, increased 0.1%, compared with an increase of less than 0.1% the previous month.

Private wages and salaries increased $39.7 billion in January, compared with an increase of $7.2 billion in December. Goods-producing industries’ payrolls increased $6.6 billion, service-producing industries’ payrolls increased $33.3 billion and government wages and salaries increased $2.5 billion.

Proprietors’ income decreased $12.8 billion, in contrast to an increase of $13.5 billion in December.

Read the BEA release.

Friday, February 27, 2015

Consumer Confidence Fell Slightly in February

Consumer sentiment fell slightly in February according to the University of Michigan survey, however levels remain near the 11 year high set the previous month. Although gas prices remained low, an unusually harsh winter suppressed shopping, contributing to a slight 2.7% decline in consumer confidence from January leaving the index at 95.4.
Consumers tend to be more optimistic about present conditions that future expectations, with the present condition index falling slightly to 106.9. Future expectations dropped three points from last month to 88, but remain high in comparison to last February’s level of 72.
Inflationary expectations have increased somewhat, but remain anchored. Consumers expect prices to rise 2.8 percent in the next year, up noticeably from 2.5% in January.