Tuesday, May 5, 2015

Non-Manufacturing ISM Index Rises in April

The Non-Manufacturing ISM Report on Business Index was 57.8 in April, up 1.3 points from 56.5 in March. Index readings above 50 indicate expansion in non-manufacturing industries. April was the 63rd consecutive month of growth. Fourteen industries reported growth in April, while four industries—Mining; Other Services; Professional, Scientific & Technical Services; and Information—contracted.

The Business Activity Index registered 61.6, 4.1 points higher than March’s number. Respondents cited improved weather and lower fuel costs as reasons for increasing activity.

The employment index grew 0.1 points to 56.7, as 13 industries reported increased employment. Four industries, Mining; Information; Other Services; and Professional, Scientific & Technical Services, reported reduction in employment.

Inventories grew to 51.0 points, up from 49.5 in March. Some respondents commented that “higher inventories are needed to calm fears about more backorders from ports,” while others noted that they reduced on–hand materials as part of a “lean initiative.”

Prices paid increased for the second month in a row albeit at a slower pace, registering 50.1, 2.3 points lower than in March. Nine industries reported an increase in prices, while 7 reported a decrease.

The index for imports was 51.5, 4.0 points lower than March’s reading but still expansionary. Four industries—Wholesale Trade; Construction; Information; and Professional, Scientific & Technical Services, reported import growth, while eight industries reported no change.

Read the ISM release

Deficit Widens as Imports Increase More Than Exports

The U.S. international trade deficit increased in March, rising to $51.4 billion, up from $35.9 billion in February. The $1.6 billion increase in exports was not enough to offset the $17.1 billion increase in imports.

The rise in exports was largely composed of a $700 million dollar increase in civilian aircraft and aircraft engines.

Imports were driven by higher demand for consumer goods, which increased by $9.0 billion and capital goods, which increased by $4.0 billion.

The goods deficit increased $14.9 billion to $70.6 billion, while the services surplus decreased $0.6 billion to $19.2 billion.

Since March 2014, the goods and services deficit has increased 5.2%. Exports decreased $11.7 billion (2.0%) and imports decreased $5.3 billion (0.8%).

Read the BEA release here

Monday, May 4, 2015

C&I Lending Standards Little Changed, Residential Demand Increases

Over the past three months, banks have further eased lending standards for a variety of home loan types, while C&I lending remained little-changed, according the April Federal Reserve Senior Loan Officer Opinion Survey.

On net, 5.3 % of respondents reported easing standards for commercial and industrial lending to large and middle-market firms. For small businesses lending, the number of respondents reporting tightening standards were virtually equal to the number reporting easing standards. Most respondents that reported having eased standards cited more-aggressive competition from other banks and non-banks as a reason for doing so. A smaller segment attributed easing standards to a more favorable or less uncertain economy. Respondents who tightened standards pointed to industry specific problems and concerns about the effects of legislative changes or supervisory actions.

A modest net fraction of banks eased standards on loans eligible for purchase by government-sponsored enterprises, and on qualified mortgage jumbo mortgage loans. Modest to moderate net-fractions of banks reported increases in demand for most categories of home loans over the last three months.

The survey contained a special set of questions regarding lending to the oil and gas extraction sector. Although higher delinquencies are expected for this sector, banks indicated that their exposures were small, and have taken steps such as restructuring loans and reducing existing credit lines to reduce them further. Over 80% of banks surveyed stated that lending to this sector accounted for less than 10% of their C&I loans.

Read the Federal Reserve report

New Orders Increase for First Time in 7 Months

New orders for manufactured goods increased 2.1% to $476.5 billion in March following a revised 0.1% decline in February according to the U.S. Census Bureau. The March increase in orders was the first after 7 consecutive months of decreases.

New orders for transportation equipment were strong, rising 13.5% to $80.4 billion, as defense aircraft and parts orders increased by 103.0% and nondefense aircraft and parts increased by 30.6%. New orders for manufactured durable goods were up by 4.4% to $241.2 billion

Shipments increased 0.5% to $482.2 billion after a 0.4% increase in February. Inventories decreased 0.2% to $649.1 billion, after remaining virtually flat in February. Unfilled orders increased by 0.1% to $1.157 trillion, following a 0.5% February decline.

The inventories-to-shipments ratio was 1.35, unchanged from February.

Read the Census Bureau release

Friday, May 1, 2015

ISM Manufacturing Index Growth Remains Slow

The ISM manufacturing index was unchanged at 51.5 points in April. Index readings above 50 indicate expansion in the manufacturing economy. Respondents again cited port delays and challenges finding qualified labor to fill positions. The transportation sector noted that North American business is flat but softening slightly globally. Of the 18 manufacturing industries indexed, 15 reported growth, up from 10 in March.

The index for new orders increased 1.7 points, while inventories declined 2 points. The gap between these two indices increased to 4 points, indicating that inventories are not keeping up with current demand.

The employment index fell to 48.3, down from 50 in March. The April reading is the lowest since September 2009 when the index registered 47.8. Of the 18 manufacturing industries, 11 reported employment growth while the textile mill, computer and electronic products, and chemical products industries reported decreases in employment.

Export orders expanded for the first time in 3 months, registering 51.5 in April, up from 47.5 in March.

The prices index rose to 40.5, up 1.5 points from March, marking the 6th consecutive month of raw material prices decreasing.

Production increased 2.2 points, growing for the 32nd consecutive month.

Read the ISM release

Construction Spending Fell in March.

Construction spending declined 0.6% in March to a seasonally adjusted annual rate (SAAR) of $966.6 billion. February spending was revised up slightly from $967.2 billion to $972.9 billion. Although growth in construction spending declined from February, construction spending for the first quarter of 2015 was 3.2% greater than the first quarter of 2014.

Total private construction fell to $702.4 billion (SAAR), a 0.3% decrease from the revised February estimate. On the year, private construction increased 2.9%.

Private residential construction declined to $349.0 billion (SAAR), down 1.6% from February, as both construction of single and multi-family homes declined for the month. For the year, private residential construction declined by 2.6%

Non-residential construction increased by 1.0%, with communication infrastructure and lodging construction posting the most notable increases.

Public constriction continued to decline, falling 0.9% from February, but increased 16.5% from one year ago.

Read the Census Bureau release

Consumer Sentiment Rebounded in April

Consumer sentiment rose in April, according to the University of Michigan survey, rising 2.9 points above March’s reading. This month’s increase brought the index to its second highest level since 2007.

University of Michigan economist Richard Curtin noted that optimism has become increasingly dependent on low inflation and interest rates, and that although most consumers anticipate a rate increase in the coming year, they expect the increase to be minimal and offset by expanding jobs and incomes.

The Current Economic Conditions Index and Index of Consumer Expectations also rose in April, rising by 2 points and 3.5 points respectively. The Index of consumer expectations is 14.1 points higher than it was in April of 2014.

Inflationary expectations fell during the month. Consumers now expect prices to be 2.6% higher one year from now, down from 3.0% in March.