Manufacturing Growth Is Up Or Down

Steven Hansen profile picture
Steven Hansen


  • The Federal Reserve says manufacturing grew in October while the US Census says manufacturing declined.
  • The difference is in the way the data is used - and they are both saying the same.
  • Little of the data released this week shows the economy is improving.

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.

Other Economic Release Summary For This Week

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.

October Trade

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.

  • that the amount of consumer credit outstanding relative to consumer expenditures is near 21st century highs.
  • Household Debt Payments As A Percent of Disposable Income is near all time lows.
  • If one removes student loans - and adjusts for inflation - then there is little year-over-year growth.
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.

This article was written by

Steven Hansen profile picture
Steven Hansen (A.K.A "The Hand") was born, raised and educated in California. Steven worked for 25 years for a major international engineering and construction corporation. He has lived outside of the USA almost continuously since 1978. Steven retired in 1995 to sail the world. He is still sailing today and is currently located in Malaysia. On the financial side, Steven is a pragmatist. His motto is to "go with the flow" and believes that the only correct investing method is one which makes you money both short and long term. He does not fall in love with philosophies – only results. He has invested well enough to retire at 45 and stay retired.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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