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Manufacturing & The Economy

Manufacturers’ Optimism Up, More Hiring Expected

According to the Q4 2014 Manufacturing Barometer survey from PwC, a strong own-company revenue forecast is planned by U.S. industrial manufacturers, raising their final calendar year 2014 growth rate to 5.2%, and a target rate of 5.8% for 2015.

New hiring plans showed a noteworthy uptick for the next 12 months, with 60% planning to add 1.1% to their composite workforce. The major force behind new hiring is the skills-gap segment (64%): 66% are planning new hiring that will add 1.3% to their composite workforces over the next 12 months. Fewer among the all-skills group (36%) are expecting to hire (44%), and the number hired will add only 0.1% to their composite workforces.

Optimism about the U.S. economy’s 12-month prospects among the industrial manufacturing panelists rebounded 11 points to 68% from the prior quarter’s 57%, reflecting continued strength, on pace with the 68% a year ago. Only 5% were pessimistic, and 27% uncertain. Currently, 82% view the U.S. economy as growing in 4Q 2014, ten points higher than a year ago (72%).

Manufacturing Production Up, 4.9% Growth Year-over-Year

According to the Federal Reserve, manufacturing output rose 0.3% in December and at an annual rate of 5.2% in the fourth quarter. Manufacturing output in December was 4.9% above its level of a year earlier. It was the fourth straight month of growth, though smaller than anticipated.

The production of durable goods increased 0.2% in December, and the production of nondurable goods rose 0.4%. Among major durable goods industries, primary metals posted the largest increase, 2.2%, while computers and electronic products registered a gain of 1.2%.

Consumer Confidence Climbs to 11-Year High

According to preliminary results from University of Michigan, consumer confidence rose in early January to its highest level in more than a decade. Gains in employment and incomes as well as declines in gas prices were cited by record numbers of consumers. More consumers spontaneously cited increases in their household incomes in early January than anytime in the past decade, and more households reported unprompted references to favorable employment prospects as well as lower prices than at any other time in the more than the half-century history of the surveys. While it may be true that consumers have allowed the confluence of more jobs, higher wages, and lower gas prices to fuel a run-up in optimism that may be hard to sustain in the months ahead, even a small retrenchment would have little impact on an expected gain of 3.0% in real consumer expenditures in 2015. 

Fed’s Beige Book Projects Continuing Economic Growth

Reports from the twelve Federal Reserve Districts suggest that national economic activity continued to expand during the reporting period of mid-November through late December, with most Districts reporting a "modest" or "moderate" pace of growth.

Manufacturing activity expanded in most Districts. Philadelphia reported that manufacturing activity grew at a modest pace during the current reporting period, with a slight slowdown relative to the previous period. Reports regarding new orders and shipments in the Philadelphia District suggested some further slowing moving forward. Manufacturing shipments and new orders grew modestly in the Richmond District. Contacts at factories in the Cleveland District reported that demand increased a bit on balance. Manufacturing activity grew at a moderate pace in Boston, New York, Chicago and San Francisco. However, a manufacturer in the Boston District indicated that congestion at West Coast ports had impeded its exports. Activity in the auto industry in the Chicago District remained a source of strength for the region. Atlanta reported that manufacturing activity strengthened overall. Minneapolis and Kansas City reported that manufacturing activity increased only slightly during the reporting period.

New Manufacturing Technology Orders Down, 2014 Still Up 2.6%

November U.S. manufacturing technology orders (USMTO) totaled $378.06 million according to The Association for Manufacturing Technology (AMT). This total, as reported by companies participating in the USMTO program, was down 15.5% from Oct. and down 14.5% when compared with the total of $442.01 million reported for Nov. 2013. Despite the monthly dip, with a year-to-date total of $4,556.60 million, 2014 is up 2.6% compared with 2013.

“Despite a downward monthly trend in manufacturing technology orders, we remain bullish on the U.S. industry market overall, with robust factory production and strong performance in the automotive sector,” said AMT president Douglas K. Woods. “Many manufacturers took a ‘pause’ in November to assess the challenges from the previous few months, such as contraction in China, Europe and Russia, less activity from the oil and gas industry due to the dramatic drop in prices and perhaps a little bit of the ‘IMTS Effect’ pulling some sales forward. Overall, however, we anticipate 2015 to be another year of positive growth, with manufacturing leading the U.S. economy.” 

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