Correction: Last week I reported the ISM numbers for July and though correct, I previously reported those July numbers early in August. I do not know why the July numbers came to my inbox on Friday but they did. Anyway, …
Institute for Supply Management Report on Business for August, issued Tuesday September 3, 2013
The report shows manufacturing sector activity expanding in August for the third consecutive month and the overall economy growing for the 51st consecutive month. According to Bradley J. Holcomb, CPSM, CPSD, chair of the ISM Business Survey Committee
The PMI registered 55.7 percent, an increase of 0.3 percentage point from July’s reading of 55.4 percent. The August reading, the highest of the year, indicates expansion in the manufacturing sector for the third consecutive month.”
Hooray for positive news!!
Report on Manufacturers’ Shipments, Inventories and Orders July 2013 released by the US Department of Commerce 9/5/13
- New orders for manufactured durable goods in July, down 2.4 percent following three consecutive increases and following a 1.6 percent June increase.
- Shipments of manufactured durable goods in July, down three of the last four months, decreased 0.3 percent.
- Unfilled orders for manufactured durable goods in July, up five of the last six months, increased 0.4 percent.
- Inventories of manufactured durable goods in July, up three of the last four months, increased 0.3 percent.
From Dr. Ken Mayland Economic Consultant to the Precision Machined Products Assn. on the Purchasing Managers Index (PMI) from the ISM
The August reading of 55.7, if sustained, would be consistent with a 4.2% rate of increase of real GDP, according to the ISM. New Orders were up, the Production component edged down. Both of these activity related survey responses are solidly in positive territory. This is the 2nd straight strong PMI reading. The prospects for the 2nd half of this year are looking up.”
The prices component of the survey swung from a negative to a positive and supplier lead times are lengthening. These improvements are backdoor indicators of a pickup in A-C-T-I-V-I-T-Y!”
The rest of the world is looking better too.”
CNBC reports a new Boston Consulting Group study reveals the United States is “fast becoming one of the lowest-cost countries for manufacturing in the developed world.” According to BCG, by 2015, production costs in the US will be 8-18 percent lower than in France, Germany, Italy, Japan and the United Kingdom. This will “result in a jobs shift back to the US.” According to CNBC, BCG expects 2.5 million to 5 million more factory and service jobs in the USA by 2020.
According to the Federal Reserve Bank of Richmond, the Central Atlantic’s manufacturing sector expanded in August.
The Federal Reserve Bank of Dallas announced last Monday that the manufacturing sector in Texas continued to expand in August though at a slower pace.
From an overview of economic conditions prepared by the PMPA
So far this year we have seen leading indicators rise, fall and rise again. Some indicators that had previously been overtly positive are now showing signs of cyclical weakening. One venerable longer term indicator, Corporate Bond Prices, has turned decidedly negative of late….we have moderated the projected decline for the upcoming business cycle downturn, but our year-end 2013 outlook remains unchanged.”
If we use US Industrial Production as the benchmark for the US economy, our outlook since early this year has not changed:
2013 will come in about 3.0 percent higher than 2012
2014 will come in at -0.6 percent
2015 will be up 2.2 percent
2016 will be up 3.4 percent
Since the May report we have been predicting a June 2014 high for annual Industrial Production. This has not changed. Our quantitative forecast for 2013 has not changed since February 2011.
The S&P 500 rebounded from a rough June, established a record high in July and continued to rise in early August suggesting that the unprecedented rising trend may be coming to an end as summer draws to a close. The decline in the Bond Market quarterly is a long term harbinger of a decline in the S&P 500.
The Industrial Production rate of rise is less than stellar at 2.4 percent over the last 12 months but at least it compare favorably with the 1.7 percent average for the period between the 2002 recession low and the 2008 cyclical peak.
Indications are that the 12MMA data trend will rise through the first half of 2014 before slipping into a minor downturn in the second half of 2014. This means we should expect the first half of 2014 to be stronger than the second half of the year. Look for the downturn to be brief and mild by historical standards. The economy will be on better footing in the second half of 2015.”
These analyses and projections are consistent with those I have been hearing for the past couple of years. Next week I am attending an Economic Conference put on by the Metals Service Center Institute and will present my findings in next week’s View. Essentially the good news reported in this week’s View is consistent with these forecasts. Our business is experiencing the same bump but I must say, the economy has pretty much sucked for ours and many other sectors since the “recovery” began in 2009. Now we are to prepare for a cyclical downturn in the 2nd half of 2014, and though the pundits believe it will be short and mild in nature, it will certainly affect some more negatively than others.
I was fortunate to spend some time with the Honorable Senator Rob Portman this week at a fundraiser Syria…what a fiasco! In my view, this has been mishandled from the start: the “red line” statement should never have been made, it’s why we are in this mess anyway and further, acting without support from the United Nations, the entire world community as a whole, is unwise and uncalled for. Why must it fall on us to pull everyone’s ass out of the fire? By the way, where is Jordan, Saudi Arabia, Turkey? Has any Muslim country or Muslim anywhere denounced these atrocities? There is no benefit to our executing a “limited” or any other type of military campaign in that country. If we are not going to seek a regime change through military action, what is the purpose? Are we going to kill a few camels and let things go on as they are? That is ridiculous. Quite frankly, our enemies are killing each other over there. Let them continue to do the job themselves. They are not worth one American life or any American help whatsoever.
Have yourself a great late summer weekend,
God Bless America