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“While many districts described the improvements as only moderate, most districts stated that gains were widespread across sectors,” the US central bank said in its Beige Book survey released on Wednesday. “Manufacturing continued to lead, with virtually every district citing examples of steady improvement, often with reports of increased hiring.”
Manufacturing activity increased across the board, with strength in industries including auto and auto parts, commercial aircraft and high-tech goods.
Despite the general improvement, “uncertainties remained high” in many districts, the Fed said, with seven regions reporting sales and production disruptions in the wake of Japan’s earthquake and nuclear crisis. Businesses also reported uncertainty over government spending as Congress battled over the 2011 federal budget.
While wage pressures were “weak or subdued” in most of the 12 districts, businesses reported upward pressure on prices due to higher commodity costs, particularly for energy and raw materials.
Input prices rose, especially for petroleum, agricultural commodities including cotton, and industrial metals. The surging cost of oil spurred shippers to impose fuel surcharges in some regions as well. Signs that companies could pass cost increases on to their customers were mixed, the report said, with manufacturers facing less resistance than retailers or builders.
Retail sales improved across most districts as consumers spent more, except in Boston, where sales were mixed, and Richmond, where sales were weak. Car sales increased, except in Richmond and Chicago, but businesses in several regions were worried about the impact of the Japanese crisis on the supply chain.
Job growth was generally stronger, with eight districts reporting increased or modest improvement in employment activity. But hiring was limited or delayed in Philadelphia, Cleveland and San Francisco and conditions were mixed in St Louis.
The weak housing market continued to weigh on the economic recovery, with demand for single-family homes little changed or weaker across all districts. Commercial real estate was also weak, but seven districts did report “slight improvements.”
The Fed’s report follows growing signs of an accelerating recovery on several fronts. The labor department earlier this month reported the economy added a stronger-than-expected 216,000 jobs in March, while the latest purchasing managers’ index showed the manufacturing sector continued to expand over the month.
Published: April 13 2011 20:21 | Last updated: April 13 2011 20:21
By Shannon Bond in New York
The AP (4/7, Rugaber) reports, “Unemployment rates are falling in most metro areas across the country, suggesting that recent nationwide gains in hiring are widespread and not limited to a few healthy regions.” According to the Labor Department, “more than three-quarters of the nation’s 372 largest metro areas reported lower unemployment rates in February than the previous month,” while “more than 300 areas added jobs in February compared to the previous month.” Moody’s economist Marisa DiNatale said the rise in employment opportunity is “definitely becoming a lot more broad-based.”
Bloomberg News (4/7, Ryan) reports, “UK manufacturing growth unexpectedly stalled in February as declining production of goods from chemicals to plastics dented the industrial recovery.” This is according to a report from the Office for National Statistics, the text of which “casts doubt on the strength of the economy’s rebound from a contraction in the fourth quarter at a time when higher raw-material costs threaten to squeeze manufacturers’ margins,” according to the article. “We’ve been skeptical that the recovery in manufacturing can continue at the pace it has been,” one analyst said, adding, “It will still have a good year. This outturn probably reflects monthly volatility.”
The AP (4/7) reports, “British industrial production fell 1.2 percent in February from January, an official report said Wednesday, marking the largest monthly fall since August 2009 and far worse than analyst expectations for an increase of 0.2 percent. The Office for National Statistics said a 7.8 percent drop in oil and gas extraction was the main reason for the fall, while the manufacturing sector was flat.”
The Financial Times (4/6, Pimlott, Subscription Publication) quotes Simon Kirby of the National Institute of Economic and Social Research, who said, “We had the opening salvo of a VAT rise [in January] and that’s it so far, and inflation is likely to dampen spending from now on.” Kirby added, “That’s why the figures are worrying, because of what the recovery will look like for the rest of the year.”
Bloomberg News (4/7, Black) reports, “German factory orders rose almost five times as much as economists forecast in February, indicating growth in Europe’s largest economy gathered pace in the first quarter.” The German Economy Ministry said that “orders, adjusted for seasonal swings and inflation, gained 2.4 percent from January, when they jumped 3.1 percent.” Experts had predicted a gain of 0.5 percent. “With German companies stepping up investment and hiring to meet booming export orders, the European Central Bank is poised to raise interest rates tomorrow to keep a lid on inflation.” Economist Klaus Baader said, “This points to continued strong growth momentum in manufacturing output for the next several months.”
From SME Daily Executive Briefing 4/7/2011
CNBC (3/28, Gewirtz) reported, “In another sign the American economy is on the comeback trail, a new survey from KPMG shows optimism is improving among US manufacturing and service industry executives.” The survey found that “68 percent of manufacturing executives believe business activity will be higher in the next 12 months,” a gain of 11 percent from October of last year. And “41 percent of those same executives say they plan to hire more in the weeks and months ahead,” up from 28 percent in the same time period.
The Ecommerce Journal (3/29) reports, “In terms of revenue 65% of manufacturers surveyed by KPMG expect revenues to rise in the next year. ‘American manufacturing is on the rise because companies are rebalancing, and it is pretty clear demand is picking up nationwide,’ said Lynne Doughtie, KPMG’s National Managing Partner for Advisory Services.”
Manufacturing Economic Activity At Highest Level Since 2004. The Boston Business Journal (3/28) reported in its “BBJ Morning Buzz” blog, “The manufacturing sector singularly contracted over the past several decades,” a contraction that was hastened by the recession. But now “a number of area manufacturing firms are sporting some new faces on their floors as the sector undergoes something of a recovery.” According to a recent article in the Sun Chronicle, “The Manufacturing Institute for Supply Management reported that nationally, economic activity in the manufacturing sector grew in February for the 19th consecutive month and reached its highest level since May 2004.”
From SME Daily Executive Briefing 3/29/2011
In an opinion article on the New York Times (3/28) website, Allison Arieff writes that in contrast to the image of decline people often associate with manufacturing in the US, “there are many parts of this country where manufacturing is very much alive, albeit in a different form.” Arieff focuses on the work being done by San Francisco’s SFMade and New York’s Made in NYC, “geographic ingredient branding” groups which “are increasingly able to share success stories of how manufacturing has developed new models for doing business in the 21st century.” Part of these companies’ success stems from a growing consumer desire to get locally produced goods, as have “growing consumer demand for greener, more ethically produced products, along with skyrocketing unemployment and nervousness about globalization.” Arieff argues that it is “time to rethink, and indeed rebrand, American manufacturing.”
From SME Daily Executive Briefing 3/28/2011
Despite the slow overall recovery, the factory jobs picture in February was as strong as it’s been in any month since 1973.
It’s possible that January’s massive storms led to more hiring in February due to pent-up demand. But company managers say, and data show, that hiring is on the rise in the manufacturing sector.
Nationally, the Manufacturing Institute for Supply Management (ISM) report said 56 percent of factories were keeping employment level, and 35 percent added people to their staffs in February. Those kinds of readings have not been seen in 38 years.
To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net
“U.S. manufacturing is booming” and helps explain why stock investors shouldn’t panic over Japan’s nuclear disaster or the Middle East’s conflicts, according to Edward Yardeni, president and chief investment strategist at Yardeni Research Inc.
Growth has been “surprisingly robust” and may be accelerating, Yardeni wrote today in a report. He cited the Federal Reserve Bank of Philadelphia’s factory index for March, which showed the fastest expansion since 1984. The indicator for eastern Pennsylvania, southern New Jersey and Delaware climbed to 43.4 from 35.9 in February.
In February, the ISM index rose to 61.4, matching its highest level since 1983. Readings greater than 50 point to expansion. The indicator has risen for seven straight months.
“It is becoming increasingly obvious” that U.S. factories are taking part in a global manufacturing surge that includes countries such as Germany and South Korea, Yardeni wrote.
The growth is among a dozen reasons not to panic over what’s happening in Japan and the Mideast, the report said. Others include “super-normal” earnings growth, a rebound in employment, a pickup in takeovers and “extremely stimulative” fiscal and monetary policy.
The New York Times /AP (3/18, B3) reports that US manufacturing output rose in February for the sixth straight month in a row, gaining 0.4 percent, according to the Federal Reserve. “Manufacturers have increased production in 17 of the 21 months since the recession ended,” and “stronger factory activity has been an important factor supporting job growth” During February, “factories added 33,000 job.”
Bloomberg News (3/18, Willis) reports that February’s growth “followed a 0.9 percent January gain that was three times as large as initially estimated, Fed figures showed today.” Firms are “benefiting from overseas demand, business investment and inventory restocking that are fueling manufacturing.”
Industry Week (3/18) reports, “The production of durable goods advanced 0.9% in February, and gains were widespread across its major categories.” Motor vehicle production rose 4.2%, and “sizable gains also were recorded in February in wood products; nonmetallic mineral products; computer and electronic products; electrical equipment, appliances, and components; furniture and related products; and miscellaneous manufacturing.”
The “Real Time Economics” blog of the Wall Street Journal (3/17, Lahard) reports that while factories in general are seeing a low level of capacity utilization, textile mills, apparel makers, and producers of computer and peripheral equipment have seen a significant tightening of capacity, although for the first two it’s mostly due to a drop in US productive capacity.
According to the Philadelphia Inquirer (3/18, Schweizer), the Federal Reserve Bank of Philadelphia reported that, “riding a wave of new orders, manufacturers in the Philadelphia area ramped up production this month to the highest level in more than 27 years,” rising to 43.4 from 35.9 last month. “The strength was broad-based, the Philadelphia Fed said, with manufacturers’ shipments of finished products, unfilled orders, and labor conditions all at high levels.”
Bloomberg News (3/18, Willis) reports, “Rising exports to emerging economies such as China, along business investment and inventory rebuilding are generating bigger gains in factory production.” Industry Week (3/18) reports, “Increases in input prices continue to be widespread, and more firms have been reporting increases in prices for their manufactured goods in recent months. Most firms also indicated that they expect acceleration in production over the next quarter.”
According to the Philadelphia Business Journal (3/18, Kostelni), the indicators “pointed to an uptick in future production activity during the next quarter.”
The Wall Street Journal (3/18, Whittaker) reports that increasing copper prices have manufacturers turning to aluminum, as the difference in cost of the metals has reached the point that it is greater than the expense of retooling some manufacturing processes as well as the cost of the extra aluminum needed to conduct the same amount of electricity in copper. Wiring for cars and buildings, as well as evaporator and condensing coils for air conditioners and refrigeration are poised to make the switch.
From SME Daily Executive Briefing 3/18/2011
NPR’s Weekend Edition (3/5, Arnold) reported on the “steady job gains” that have been made in the US, many of them in manufacturing. The story highlights the successes of AccuRounds, “an advanced manufacturing facility in Avon, Mass.,” that “makes a broad range of precision-tooled metal parts.” The company has seen its orders increase over the past several months, and consequentially has begun a steady stream of hiring. Similar stories are being told across the manufacturing sector. This most recent decline in unemployment “doesn’t mean the unemployment problem is over. But companies are hiring at a pace that should continue to bring down unemployment slowly.”
Unemployment Falls Below 9%. The Los Angeles Times (3/5, Puzzanghera) reports “average Americans might look back on February 2011 as the point when the country finally turned the corner,” although the recession has technically been over since the middle of 2009. “The Labor Department said the economy added 192,000 new jobs last month, a sharp increase that helped trim the unemployment rate to 8.9% – the first time it has been below 9% in nearly two years.” Analysts pointed to the lowered unemployment, as well as “encouraging data on auto sales, chain store revenue and other economic barometers” as evidence that the US economy had likely reached “escape velocity” from the downturn. Energy prices, particularly oil volatility stemming from the unrest in Libya, remain a concern however.
Bloomberg News (3/5, Homan) reported, “Hiring was widespread, with manufacturing, construction and transportation companies adding workers, underscoring Federal Reserve Chairman Ben S. Bernanke’s testimony to Congress this week that there are ‘grounds for optimism’ in the labor market.” Bernanke cautioned that “the labor market ‘has improved only slowly,’ and it may take ‘several years’ for the unemployment rate to reach a ‘more normal level.'” Even so, he added, “we do see some grounds for optimism about the job market over the next few quarters, including notable declines in the unemployment rate in December and January, a drop in new claims for unemployment insurance, and an improvement in firms’ hiring plans.”
Falling Unemployment Not Cheering Liberals Or Conservatives. The AP (3/7, Kuhnhenn) reports unemployment “is dropping, but the reaction from both the left and right ends of the political spectrum is surprisingly unenthusiastic.” Conservatives “fear the improvement will weaken their argument that the way to bring back jobs is less regulation and more fiscal discipline,” but liberals “worry that better job numbers will create momentum for spending cuts that will cause the fragile recovery to falter.” The “divided reaction illustrates the ideological forces pulling at President Barack Obama as he tries to gain economic and political traction out of the positive jobs report.” Austan Goolsbee, chairman of Obama’s Council of Economic Advisers, said, “Overall, it’s a very solid jobs report. And overall there’s been increasing optimism that despite having a long way to go, we’re clearly headed in the right direction and we’re putting some miles behind us and trying to get back to a good situation.
Bloomberg News (3/7, Willis) reports, “US retail sales probably climbed in February by the most in four months, spurred by job growth and more seasonable temperatures,” according to a poll of economists taken by Bloomberg. “Chain-store sales did well, automobile sales improved sharply and employment bounced back” said one IHS Global Insight analyst. “Households may have realized that they have some extra cash in their pockets due to this year’s cut in the payroll tax.”
The Wall Street Journal (3/7, C1, Evans, subscription required) reports US companies have a record $1.4 trillion on hand, and there are indications that they are beginning to increase spending on new hires and dividends. The Journal notes Standard & Poors analyst Howard Silverblatt has reported 87 companies have increased dividends, while 7 additional companies have announced plans to pay a dividend, compared to 78 in the first quarter of last year. S&P forecasts dividends will reach $225 billion by the end of the year.
SME Daily Executive Briefing, March 7, 2011
WASHINGTON – The number of people requesting unemployment benefits last week plunged to a nearly three-year low, bolstering the likelihood that companies will increase the pace of hiring this year.Applications for unemployment benefits fell by 20,000 to a seasonally adjusted 368,000, the Labor Department said Thursday. It was the third decline in the past four weeks. Applications are now at their lowest level since May 2008.
The four-week average for applications, a less volatile figure, fell last week to 388,500. That’s the lowest level since July 2008, the last time the four-week average was below 400,000.
Applications that remain consistently below 375,000 tend to signal steady declines in the unemployment rate. Unemployment benefit applications peaked during the recession at 651,000.
Analysts are predicting strong job gains in the March employment report, which the government will release Friday. Brightening the outlook for more aggressive hiring, the service sector expanded at the fastest pace in more than five years in February, and the manufacturing sector grew last month at the fastest pace in nearly seven years. And retailers are reporting solid gains for February after the best holiday shopping season since 2006.
Stocks surged after the economic data was released. The Dow Jones industrial average rose by more than 180 points in morning trading.
“Often at this stage of the recovery, when these signals are in place, we see a surge in hiring,” said John Ryding, an economist with RDQ Economics.
Economists estimate that employers added a net 175,000 jobs in February. That would mark an improvement from an anemic 36,000 jobs in January when severe winter weather held back hiring.
At the same time, economists think the unemployment rate edged up to 9.1 percent in February. Unemployment rates often tick up when an improving economy causes out-of-work people who haven’t been looking for jobs to start. People out of work aren’t counted as unemployed unless they’re job hunting. During a weak economy, some people become discouraged and stop looking.
Separately, retailers reported revenue gains for February, extending the spending momentum seen during the holiday season. Limited Brands Inc. and Macy’s Inc. reported gains that beat Wall Street expectations, while Target Corp. announced an increase slightly below analysts’ projections. The figures are based on revenue at stores open at least a year and are considered a sign of a retailer’s health.
The service sector, which employs about 90 percent of U.S. workers, grew in February at the fastest pace in more than five years, according to the Institute for Supply Management. It marked the sixth straight monthly increase. The sector covers a broad range of industries including retail, health care and financial services.
Another report Thursday confirmed that workers boosted their productivity in the final three months of 2010 at the fastest pace in nine months.
The downward trend in applications for unemployment benefits suggests that companies are easing the pace of layoffs now that the economy is strengthening consistently. During the recession, companies slashed work forces, cut or froze workers’ pay and took other aggressive steps to reduce costs.
Stronger job creation is needed to steadily reduce unemployment. Economists say it would take up to 300,000 new jobs a month to reduce the unemployment rate significantly.
Thursday’s report also showed the number of people receiving unemployment benefits dropped to 3.77 million, the lowest level since mid-October 2008. That doesn’t include millions of people enrolled in emergency unemployment benefit programs funded by the federal government.
An additional 4.5 million unemployed workers received benefits under the extended programs during the week ending Feb. 12. Altogether, 9.2 million people were on the benefit rolls that week.
Manufacturers expanded at the fastest pace in nearly seven years last month, but a sudden rise in the price of raw materials could threaten their profits.
The Institute for Supply Management said Tuesday that its index of manufacturing activity rose to 61.4 in February, up from 60.8 the previous month. That’s the highest reading since it reached the same level in May 2004. The index bottomed out at 33.3 in December 2008, its lowest point in nearly 30 years.
Any reading above 50 indicates expansion. The manufacturing sector has expanded for 19 months.
The rebound in manufacturing is gaining momentum, the report showed. The new orders index rose to a seven-year high. A measure of order backlogs climbed to its highest level in a year. And inventories are shrinking at manufacturers and their customers. All are signs that factory output is likely to keep growing.
“The recovery in the sector is both robust and on track,” said Ian Shepherdson, an economist at High Frequency Economics.
Solid growth overseas, particularly in developing countries such as China, Brazil and India, has also helped by boosting exports. A measure of export orders rose to its highest level in more than 22 years.
And an employment index topped 60 for only the third time in a decade, evidence that manufacturers are adding employees at a rapid clip.
But prices paid for steel, plastics, rubber and other raw materials rose for a third straight month, a sign that increasing production costs could spark higher inflation.
“Growth may not be as robust as we would like because of these rising commodity prices,” said Brian Levitt, an economist at OppenheimerFunds.
High gasoline and food prices reduce the amount of money consumers can spend on discretionary items such as computers and other electronics. Manufacturers may also eat some of the higher costs, which would cut into profit margins, Levitt said.
“While there are many positive indicators, there is also concern as industries related to housing continue to struggle and the prices index indicates significant inflation of raw material costs across many commodities,” said Norbert Ore, chairman of the institute’s survey committee.
The price of materials is another challenge for the struggling construction industry. The Commerce Department said Tuesday that spending by builders fell in January to a seasonally adjusted annual rate of $791.8 billion.
That’s slightly above the decade low of $791.5 billion in August, and about half of the $1.5-trillion level that economists believe would signal a healthy construction sector. It could take four more years before construction recovers to that level, economists say.
Associated Press
March 1, 2011, 1:30 p.m.
