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Economic Indicators for U.S. Manufacturers (November 2023 Roundup)

Posted by IndustryNet on Monday, November 20, 2023

Economic Indicators for Manufacturers

Economic Indicators for U.S. Manufacturers in November

Economic indicator reports released in November reflect a sector hit hard by the UAW strike and finds manufacturers grappling more intensely with softening demand. Meanwhile, one independent survey finds manufacturers’ expectations for 2024 are far rosier than you would think and a stellar GDP report reveal unexpected resiliency in the U.S. industrial sector. Wondering what the latest data tells us? Get our key takeaways on labor, output, prices, optimism, regional performance, and more from November’s most critical manufacturing business reports.

Executive Summary

• U.S. manufacturing output declined, driven largely the UAW strike, which caused a nosedive in auto sector output.
• The UAW strike also impacted employment, driving manufacturing employment levels down by 35,000 jobs.
• The most recent GDP report finds the U.S. economy grew 4.9% in the third quarter of this year, while an independent survey found 88% of manufacturers expect increased revenue in 2024.
• Manufacturing activity took a surprise turn in October, falling further into contraction as new orders and output softened.
• Regional surveys were mixed, with some regions reporting muted growth and others stuck in contraction.

Manufacturing Output & Employment Impacted by UAW Strike

Manufacturing declined 0.7% in October, according to the Federal Reserve’s Industrial Production and Capacity Utilization report released November 16th. Meanwhile, the index for mining rose 0.4% and the index for utilities fell 1.6%. Overall, industrial production declined 0.6% in October, after advancing 0.3% in November.

Meanwhile, manufacturing capacity utilization headed down 0.6% to 77.2% --one percentage point below its long-run average.

Related: How Outsourced Industrial Prospecting Can Help Your Manufacturing Company Survive Uncertain Times

The decline in manufacturing output was almost exclusively due to the UAW strike, which drove output in the motor vehicle and parts sector down by 10%. Other sub-industries seeing a decline in output included plastics and rubbed (-2.2%); primary metals (-1.7%); and furniture (-1.3%).

On the upside, output increased in petroleum and coal products (+2.2%); computer and electronic products (+1.9%); and electrical equipment (+1.5%).

The UAW strike also had a major impact on manufacturing employment levels. Following a 17,000 job gain in September, manufacturing employment levels in the United States declined by 35,000 in October, according to the U.S. Bureau of Labor Statistics. This was overwhelmingly due to the automotive sector, which shed 31,000 jobs due to the strike.

Other job losses were seen in plastic/rubber products; chemical manufacturing; and computer & electronic products.

Employment gains in October were led by food products manufacturing, which gained 6,200 jobs, while beverage, tobacco & leather; printing; fabricated metals; and paper products also saw job increases.

U.S. Manufacturing Activity Slows in October

In October, U.S. manufacturing activity experienced a slowdown, marking the 12th consecutive month of contraction for the sector. The Institute for Supply Management’s survey of purchasing and supply executives released November 1st, revealed that the index of manufacturing activity declined to 46.7%. Lower demand, employment, and backlogs contributed to this decline. New orders, backlogs, and employment all contracted during this period, while production and inventories also decreased. The only bright spots were supplier deliveries and new export orders.

GDP Report & Independent Survey Paints Brighter Picture

Meanwhile, the latest GDP report, released October 26th, found The U.S. economy grew at a faster pace of 4.9% in the third quarter of 2023, driven by strong consumer spending, especially on services, and a rebound in exports and government spending. The growth exceeded expectations and showed that the economy has recovered from the pandemic-induced recession. However, manufacturers still face challenges from supply chain disruptions, labor shortages, higher input costs, and uncertain trade policies.

Another spot of bright news this month came from a survey conducted by accounting firm Wipfli, LLP, which revealed manufacturers remain optimistic despite pandemic challenges. The survey reveals that 88% of manufacturers anticipate increased revenue in 2024. However, workforce retention is a pressing concern, with 63% worried about retaining qualified employees

The survey also found cybersecurity investments are on the rise, and 99% of manufacturers prioritize digital transformation. Supply chain disruptions and inflation pose additional hurdles.

Related: Selling in a Downturn: Opportunities & Best Practices

Regional Manufacturing Surveys Mixed

New York Manufacturing Survey 

The latest Empire State Manufacturing Survey shows that business activity in New York State showed modest growth in November. The headline general business conditions index rose to 1.9, indicating a slight improvement. New orders increased, although shipments remained relatively stable. Unfilled orders declined, and delivery times shortened. Labor market indicators pointed to a slight rise in employment and the average workweek. While input prices saw a similar pace of increase as last month, selling price increases moderated. Looking ahead, firms expressed relative optimism for the next six months.

Richmond Fed Manufacturing Survey

According to the latest survey from the Federal Reserve Bank of Richmond, manufacturing activity in the Fifth District changed little in October, with the composite index edging down from 5 in September to 3 in October. The index reflects the balance of positive and negative responses from firms on various aspects of their business conditions. A positive index indicates that activity is expanding, while a negative index indicates that activity is contracting.

The survey results show that shipments and employment increased slightly, while new orders decreased. Firms also reported declining backlogs and vendor lead time. The Richmond Fed Manufacturing Survey encompasses data from manufacturers in Maryland, North Carolina, Virginia, West Virginia, and the District of Columbia.

Kansas City Manufacturing Survey

According to the latest survey by the Federal Reserve Bank of Kansas City, manufacturing activity in the 10th district, which covers Colorado, Kansas, Nebraska, Oklahoma, Wyoming, northern New Mexico and western Missouri, continued to decline in November. The composite index, which measures the overall activity, was -2, slightly higher than -8 in October, but still negative for the third consecutive month. The survey also showed that employment levels and average workweek decreased, while shipments and new orders improved moderately. The future outlook for the next six months also dipped slightly, as firms expected lower production, employment, and capital spending.

The Kansas City survey gathers responses from companies in Colorado, Kansas, Nebraska, Oklahoma, Wyoming, Northern New Mexico and Western Missouri.

Texas Manufacturing Outlook Survey

According to the most recent Texas Manufacturing Outlook Survey conducted by the Dallas Fed and released October 30th, Texas factory activity expanded modestly in October, with the production index posting a positive reading for the second month in a row. However, other indicators of manufacturing activity, such as new orders and shipments, showed mixed signals or remained near zero. The survey also revealed that perceptions of broader business conditions continued to worsen, with the general business activity and company outlook indexes staying in negative territory for the 18th consecutive month. The outlook uncertainty index remained elevated, suggesting that manufacturers are still facing a high degree of uncertainty about the future.

Philly Manufacturing Activity Remains Weak in November

The latest Manufacturing Business Outlook Survey from the Federal Reserve Bank of Philadelphia shows that manufacturing activity in the region continued to decline in November. The survey’s indicator for general activity rose slightly but stayed negative, indicating a contraction in the sector. The indicator for shipments also turned negative, while the indicator for new orders was positive but low. The employment index suggests steady employment overall, and both price indexes indicate overall increases in prices. The future indicators suggest that firms’ expectations for growth over the next six months remain subdued

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