US Census says manufacturing new orders declined in October. On the other hand, the Federal Reserve says Industrial Production subindex manufacturing improved in October - but the year-over-year rate of growth slowed.
Part of the difference between the US Census and the Federal Reserve's views on manufacturing:
- The US Census data is not adjusted for inflation.
- US Census and the Federal Reserve use different methods for determining MoM change (I use the change in YoY growth to determine MoM change).
- The US Census focuses on new orders, the Federal Reserve on manufacturing output - in other words the pulse points are different.
Still once one inflation adjusts the US Census data - there's general correlation between these two data series.
Another obstacle in being able to trend the US Census data is the monthly extreme volatility in the transport sector. Removing transport gives one a better view of the rate of growth (blue line on below graph).
The real headlines for US Census and should have simply said that manufacturing growth slowed in October - but in perspective it's still growing faster than GDP.
Economic Releases This Past Week
The following table summarizes the more significant economic releases this past week. For more detailed analysis - please visit our landing page which provides links to our complete analyses.
|Release||Potential Economic Impact||Comment|
|October Construction Spending||Signs economy is slowing|| |
The rolling averages declined - and last month was significantly revised down. Also note that inflation is grabbing hold, and the inflation adjusted numbers are in contraction.
|November ADP Employment||Marginal||ADP reported non-farm private jobs growth at 179,000 which was within the range of expectations. Even though growth this month is less than last month, the rate of ADPs private employment year-over-year growth is on the high side of the tight range seen over this year.|
|Final October Productivity and Costs||Positive economic potential|| |
If data is analyzed in year-over-year fashion, non-farm business productivity improved 1.3 % year-over-year (same as preliminary growth), and unit labor costs were up 0.9 % year-over-year [down from the preliminary growth published as 1.5%]. Bottom line: the year-over-year data is saying that productivity improvements are now outpacing labor cost growth.
|November Beige Book||Signs economy is slowing?|| |
On the surface, it seems like the rate of growth was about the same as last month. After reading the narrative, one gets the feeling of a slightly slowing economy.
|Signs economy growth is little changed|| |
The data in this series wobbles and the 3 month rolling averages are the best way to look at this series. The 3 month averages insignificantly slowed for exports and was unchanged for imports. Imports have a direct correlation to economic activity.
|October Manufacturing||Signs economy is slowing|| |
US Census says manufacturing new orders declined. According to the seasonally adjusted data, it was civilian and military aircraft which was the major contributor to the decline.
|November BLS Employment||Rate of employment growth slowing|| |
The headline seasonally adjusted BLS job growthwas below expectations. The internals looked ok, but the pace of jobs growth slowed. The household and establishment surveys both showed ok growth - but the rate of growth was not much better than population growth. The year-to-date employment is running above the pace of last year - but the pace slowed this month. Last month's employment gains were little changed. The growth this month was below expectations. Just considering this month's data - this month was worse than last month.
Non-seasonally adjusted non-farm payrolls grew 631,000 - better than last year and better than most Novembers this century. The following chart compares the jobs gains this month with the same month historically:
|October Wholesale Trade||Signs economy is slowing|| |
The headlines say wholesale sales declined month-over-month with inventory levels remaining slightly elevated. Our analysis shows a deceleration of the rate of growth for the rolling averages.
|October Consumer Credit||Little real change from last month|| |
The headlines say consumer credit rate of annual growth significantly grew relative to last month. However, the previous month's total outstanding credit was revised significantly down.
|Surveys||Roughly little changed from last month||This week there were two sets of survey's released - the ISM and Markit surveys for manufacturing and services. Generally speaking, the Markit surveys showed an insignificant slowing whilst the ISM surveys showed modest acceleration.|
|Weekly Rail Counts||Signs economy is slowing||The rolling averages and the year-over-year growth continues to slow - and now the intuitive sectors are in contraction YoY. There is a correlation between rail growth and economic growth - and rail is saying the economy will slow.|
This week the economically negative news seems to balance the positive developments (or vise versa).
Our Economic Forecast for December:
The Econintersect Economic Index for December 2018 continues to show this economic growth cycle continues and remains well into territory associated with normal expansions. With the mixed economic picture and stock market turmoil one might expect our forecast to significantly degrade. But the Econintersect Economic Index (EEI) only insignificantly declined this month and remains well into territory associated with normal expansions. Over the last three months the index's growth rate is almost unchanged. Still we are seeing mixed trend lines - which usually happens when there's an overall reversal in trends. Our major worry is the rapid deceleration of growth in rail transport data - a usual flag for a slowing economy. Additionally the building sector is in contraction, but "this time" the reason is affordability - and this sector needs help from other sectors to bring the economy into a recession.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.