Daily Management Review

Moderate Economic Growth Pointed To By U.S. Spending And Factory Data


08/02/2017




Moderate Economic Growth Pointed To By U.S. Spending And Factory Data
Setting the stage for a moderate economic expansion in the third quarter, amid a slowdown in new orders and consumer spending barely rose in the prior month, a gauge of U.S. factory activity slid from a near three-year high in July.
 
And showing motor vehicle sales in July recorded their biggest year-on-year drop in nearly seven years, that was reinforced by other reports on Tuesday. Indications that the government could cut its second-quarter GDP growth estimate was shown in a plunge in construction spending in June.
 
Accelerating from the first-quarter's tepid 1.2 percent pace, the economy grew at a 2.6 percent annual rate in the April-June period, the Commerce Department reported last week.
 
"If the consumer has any say, don't expect any major improvement in growth," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. "Yes, manufacturers are saying things are good, but with vehicle sales trending downward compared to last year, it is likely there is little room for further improvement."
 
The index of national factory activity fell to 56.3 last month from 57.8 in June, which was the highest level since August 2014, the Institute for Supply Management (ISM) said.
 
Accounting for about 12 percent of the U.S. economy is manufacturing and a reading above 50 in the ISM index indicates an expansion in manufacturing. After a burst in oil well drilling activity, manufacturing is slowing as a boost from the energy sector ebbs.
 
And as companies respond to falling sales that have left them with an inventory bloat, it is also being hurt by declining automobile production. For three straight quarters, motor vehicle output has dropped.
 
While Ford Motor Co reported a 7.5 percent sales decline, General Motors Co reported on Tuesday that its sales fell 15 percent in July from a year ago.
 
Even though manufacturers were upbeat about demand after a gauge of new orders slipped to 60.4 from 63.5 in June, last month, the ISM survey's production sub-index fell 1.8 points to 60.6.
 
Either strong orders growth or demand were reported by manufacturers in the chemical, computer and electronic and nonmetallic mineral products sector.
 
While saying that "everyone is waiting till the last minute to place their orders”, machinery makers described business as very steady. They were starting to see better "order entry" and planning on a turnaround for 2018, said electrical equipment, appliances and components manufacturers.
 
While some said labor shortages were "pretty universal” and manufacturers reported employees leaving for other opportunities, a measure of factory employment dropped two points to 55.2.
 
After a 0.2 percent gain in May, there has been a rise of .1 percent in June in consumer spending, which accounts for more than two-thirds of U.S. economic activity, the Commerce Department said in a separate report on Tuesday.
 
Also, little sign of inflation was available in the data. After advancing by the same margin in May, there was an increase of 1.5 percent in the 12 months through June in the personal consumption expenditures (PCE) price index, excluding food and energy.
 
(Source:www.reuters.com) 






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