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Manufacturing & The Economy

Transportation Sinks Durable Goods Orders in August

New orders for manufactured durable goods in August decreased $54.5 billion or 18.2% to $245.4 billion, the U.S. Census Bureau announced. This decrease, down following two consecutive monthly increases, followed a 22.5% July increase. Excluding transportation, new orders increased 0.7%. Excluding defense, new orders decreased 19.0%.

Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $55.6 billion or 42.0% to $76.8 billion.

Fortunately, according to Reuters, “a rebound in business spending plans pointed to underlying strength in the manufacturing sector.” 

Factory Construction, Expansion Boosts Second Quarter GDP

Real GDP in the U.S. increased at an annual rate of 4.6% in the second quarter of 2014, the strongest growth in 2 1/2 years, according to the third estimate released by the Commerce Department’s Bureau of Economic Analysis. In the second estimate issued last month, the increase in real GDP was 4.2%.

A 12.6% increase in new factory construction was the biggest reason for the upward revision, USA Today reports. For the year, factory output is up 3.2% after growing 2.6% in 2013.

"Manufacturers are relatively upbeat about the next few months and that's really playing into increased investment," says National Association of Manufacturers (NAM) chief economist Chad Moutray. 

U.S. Economic Activity Increased in 39 States in August

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for August 2014. In the past month, the indexes increased in 39 states, decreased in six, and remained stable in five, for a one-month diffusion index of 66. Over the past three months, the indexes increased in 45 states and decreased in five, for a three-month diffusion index of 80. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire U.S. The Philadelphia Fed’s U.S. index rose 0.2% in August and 0.7% over the past three months.

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). 

NAM Study Reveals Economic Benefits of Infrastructure Spending

A new study commissioned by the National Association of Manufacturers (NAM) and conducted by Inforum at the University of Maryland offers a view into the economic benefits the U.S. economy would reap with a more concerted effort to address the nation’s infrastructure needs.

In total, the study finds that a targeted and long-term increase in public infrastructure investments from all public and private sources over the next 15 years will increase jobs by almost 1.3 million at the onset of an initial boost and grow real GDP 1.3% by 2020 and 2.9% by 2030.

Addressing infrastructure would create a progressively more productive economy, which, due to cumulative effects through time, will benefit from a $3 return on investment for every $1 invested in infrastructure by 2030. Overall, this would provide Americans an increase in take-home pay after taxes—a $1,300 net gain per household by 2020 and $4,400 per household by 2030 (measured in 2009 dollars).

Manufacturing Employment Growth Hits 2½ Year High

At 57.9 in September, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) remained well above the neutral 50.0 value, to indicate a robust improvement in overall operating conditions across the manufacturing sector. Moreover, the headline Manufacturing PMI index held at the same level as August’s 52-month high.

Increased levels of new work from both domestic and export clients contributed to a robust and accelerated pace of job creation in September. Payroll numbers rose at the fastest rate since March 2012 (and joint-strongest rise for seven years), with survey respondents citing improving demand conditions and associated efforts to boost capacity. 

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