Monday Economic Report: New Record: Manufacturing Output Soared to $2.77 Trillion in Q2

AICC, through its membership in the Council of Manufacturing Associations, is pleased to present the "Monday Economic Report" from the NATIONAL ASSOCIATION OF MANUFACTURERS (NAM).

By Chad Moutray, Ph.D., CBE – October 3, 2022

Weekly NAM Economic Toplines:

The U.S. economy  shrank  0.6% at the annual rate in the second quarter, extending the decline of 1.6% in the first quarter. The current forecast is for 0.8% growth in real GDP in the third quarter, with 1.6% annual growth in 2022. In 2023, the outlook is for 1.0% growth, but that forecast has  sizable downside risks. Indeed, more than 63% of respondents to the  NAM Manufacturers’ Outlook Survey  predicted there would be an official recession in 2022 or 2023. Real GDP in the manufacturing sector  fell by an annualized 8.5% in the second quarter, serving as a drag on growth in three of the past four quarters. With that said, manufacturing value-added output increased to $2.768 trillion in the second quarter, an all-time high. Manufacturing accounted for 11.0% of value-added output in the U.S. economy in the second quarter, the highest percentage since the fourth quarter of 2019. Yet, real value-added output in the manufacturing sector decreased for the second consecutive quarter from a record pace at the end of 2021, as expressed in chained 2012 dollars, suggesting that higher prices were inflating the record-setting nominal output data. New orders for durable goods  declined 0.2% in August, edging down for the second straight month. Excluding transportation equipment, new durable goods orders increased 0.2% to a record $180.7 billion. On a year-over-year basis, new durable goods orders have increased 8.8% since August 2021, or 6.1% with transportation equipment excluded. Core capital goods—a proxy for capital spending in the U.S. economy—jumped 1.3% to a record $75.6 billion in August, with 8.8% growth year-over-year. Meanwhile, durable goods shipments increased 0.7% to a record $272.1 billion in August, with 10.8% growth year-over-year. Manufacturing surveys from the  Dallas  and  Richmond  Federal Reserve Banks were mixed in September, but with both showing declining new orders. Respondents continued to note challenges with inflation, recession worries, supply chain disruptions, long delivery times and workforce shortages. Wage growth remained elevated. The  personal saving rate  was unchanged at 3.5% in August and was up from 3.0% in June, which was the lowest since April 2008.  As such, while Americans have generally been more willing to dip into their savings this year, savings have picked up somewhat in July and August.  The  PCE deflator  rose 0.3% in August. Energy prices fell for the second straight month, helping to moderate the headline index. Yet, food costs increased 0.8%, continuing to rise solidly year to date. Excluding food and energy prices, the PCE deflator increased 0.6% in August. Overall, the PCE deflator has risen 6.2% over the past 12 months, decelerating for the second month from the 7.0% year-over-year pace in June, which was the strongest since December 1981. Excluding food and energy, core PCE inflation was 4.9% in August, up from 4.7% year-over-year in July but down from 5.0% in June. The core PCE deflator was 5.4% year-over-year in February and March, both of which were the fastest paces of inflation since April 1983. The two measures of consumer confidence both reflected upticks in sentiment in September. Americans remain anxious about inflation, even with some moderation (especially in gasoline prices), and overall assessments remain lower than desired on economic uncertainties. READ REPORT