U.S. Economy: Services Index Advances as Price Gains Slow:
U.S. service industries grew in August 2008, as a result of prices pulled back the most in almost two years. The Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the U.S. economy, rose 1.1 percentage points in August to 50.6 percent. An index above 50 percent indicates growth.
The rise in the services measure reflects the prolonged impact of federal tax rebates and the decline in commodity costs since July.
The Tempe, Arizona-based ISM’s measure of prices paid by non-manufacturing businesses dropped to 72.9 percent, (the second straight drop from a record high reached in June) from 80.8 percent in July, the report stated. New orders climbed to 49.7 from 47.9 in July.
Energy costs in August decreased from record highs in July. The average price for a barrel of crude oil last month was $117.02, compared with $133.77 a month earlier, when a barrel reached $147.27 on July 11.
In August 2008, average hourly earnings in manufacturing were $17.75, down 0.2 percent from July 2008’s $17.79 (revised), and up 2.4 percent from $17.33 in August 2007.
(BLS/DOL Employment data from “The Employment Situation: August 2008, USDL 08-1252,” released September 5, 2008; next release is October 3, 2008)
http://www.bls.gov/news.release/pdf/empsit.pdf
The hourly compensation of all manufacturing workers increased 3.9 percent during the second quarter of 2008 (from the previous quarter, at an annual rate), reflecting increases in hourly compensation of 4.1 percent in durable goods manufacturing and 3.3 percent in nondurable goods sector.
For the second quarter of 2008, real hourly compensation, which takes into account changes in consumer prices, fell 1.1 percent in total manufacturing workers; fell 0.8 percent in durable goods industries, and declined 1.6 percent in non-durables.
In 2007, hourly compensation of all manufacturing workers grew 3.5 percent, compared to a 4.1 percent increase in 2006. Real hourly compensation in the total manufacturing sector rose 0.7 percent in 2007 after increasing by 0.8 percent in 2006.
Manufacturing profits in the first quarter of 2008 were $240.5 billion (revised), down 17.7 percent or $51.6 billion (at an annual rate) from $292.1 billion in the fourth quarter of 2007.
Compared with first quarter profits of 2007, manufacturing profits were down $76.5 billion in the first quarter of 2008. Manufacturing profits in 2007 were $12.3 billion above manufacturing profits in 2006.
Second quarter 2008 profits for all non-financial industries (manufacturing being a subcategory) were down 4.0 percent from the first quarter of 2008 to $796.8 billion, and below 25.1 percent from the second quarter of 2007.
In August 2008, manufacturing employment fell by 61,000 to 13.4 million from July’s (revised) manufacturing employment levels. The decline was registered in both, durable and non-durable sub-sectors.
For durable goods, the largest decline was in the Transportation equipment (-44,700), which has lost 126,000 jobs over the past 12 months. In August, employment also fell in industries related to construction, such as Wood Products (-6,700), Furniture and Related Products (-6,800), and Primary Metals (-3,500). However, employment increased in Computer and Electronic Products (5,100), Miscellaneous Manufacturing (4,500), and Fabricated Metals Products (1,300).
For non-durable goods, job losses registered in Plastics and Rubber Products (-3,100), Chemicals (-1,700), Paper and Paper Products (-1,300), and Textile Product Mills (-700), among others. Printing and Support manufacturing added 1,400 jobs. Over the past 12 months, manufacturing employment has declined by 416,000.
The manufacturing employment of 13.4 million workers represents 9.8 percent of total non-farm employment.
(BLS/DOL Employment data from “The Employment Situation: August 2008, USDL 08-1252,” released September 5, 2008; next release is October 3, 2008)
http://www.bls.gov/news.release/pdf/empsit.pdf
In July 2008, manufacturing production advanced 0.4 percent after rising by 0.1 percent in June.
The output of durable goods rose 0.6 percent, and gains were widespread. Among durable goods industries, increases were reported in several key sector including Motor vehicles and parts (3.6 percent); Primary metals (0.8 percent); Non-metallic mineral products (0.7 percent), Machinery (0.7 percent); and Aerospace and miscellaneous transportation equipment (1.0 percent). The only durable goods industries to have registered declines in July were Wood products (-1.3 percent); Fabricated metal products (-0.4 percent); and Furniture and related products (-0.8 percent).
The output of nondurable goods rose 0.3 percent. Declines in the indexes for Food, beverage, and tobacco products (-0.1 percent); Textile and product mills (-1.8 percent); Apparel and leather products (-0.5 percent); Paper (-0.9 percent); and Printing and support (-1.4 percent) were more than offset by higher output of Petroleum and coal products (1.9 percent); Chemicals (0.3 percent); and Plastics and rubber products (0.6 percent).
The index for other manufacturing industries (non-NAICS), which consist of Logging and publishing, fell 1.3 percent.
In July 2008, manufacturing industries (NAICS based) operated at 77.6 percent of capacity, 1.9 percentage points below their 1972-2007 average of 79.5 percent and unchanged from their revised capacity utilization in June 2008.
In durable manufacturing, capacity utilization increased 0.4 percentage points in July from June (revised) to 75.8 percent. Capacity utilization advanced in Motor vehicles and parts (2.4 percent); Primary metals (0.6 percent); Nonmetallic mineral products (0.5 percent); Machinery (0.4 percent); Aerospace and miscellaneous transportation equipment (0.7 percent); and Miscellaneous manufacturing (0.3 percent). Capacity utilization decreased in Wood products (-0.8 percent); Fabricated metals products (-0.3 percent) Computer and electronic products (-0.6 percent); and Furniture and related products (-0.6 percent).
Capacity utilization in non-durable manufacturing in July rose 0.2 percentage points from June 2008 (revised) to 80.2 percent. Increased capacity utilization was reported in Petroleum and coal products (1.8 percent); Plastics and rubber products (0.3 percent) and Chemicals (0.2 percent). These gains outweighed losses in Food, beverage and tobacco products (-0.2 percent); Textile and product mills (-1.1 percent); Paper (-0.6 percent); Printing and support (-1.1 percent); and Apparel and leather (-0.2 percent).
Compared with the first quarter of 2008, manufacturing productivity decreased 2.2 percent (seasonally adjusted annual rate) in the second quarter of 2008, as output fell 3.7 percent and hours of all workers decreased 1.5 percent. This was the largest quarterly decline in manufacturing productivity since a 2.5 percent decrease in the second quarter of 1989.
In durable goods industries, productivity fell at a seasonally adjusted annual rate of 4.5 percent in the second quarter of 2008 from the previous quarter, as output and hours decreased by 5.9 percent and 1.5 percent, respectively. In nondurable goods, productivity edged up 0.2 percent as output declined 1.3 percent and hours fell 1.6 percent.
In total manufacturing, output per hour increased 2.4 percent from the second quarter of 2007 to the second quarter of 2008. For the entire 2000-2007 period, manufacturing productivity grew at a 3.7 percent annual rate.
The trend of strong productivity growth has resulted in the decline in manufacturing employment.
Year to date June 2008, U.S. manufactured goods exports accounted for 61.1 percent of all U.S. exports of goods and services, compared with 63.1 percent a year ago. During that same period, manufactured goods exports were up 14.9 percent above year ago levels, while imports were up 5.3 percent. The trade deficit in manufactures improved to $440.8 billion (annual rate) for 2008, down from $509.1 billion a year earlier.
Shipments of manufactured durable goods in July 2008, up three of the last four months, increased $5.3 billion or 2.5 percent to $218.3 billion. This followed a 0.9 percent June increase as revised.
Transportation equipment, up three of the last four months, had the largest gain in value of shipments of $2.0 billion or 3.8 percent to $55.0 billion.
The shipments also rose in Primary metals (3.4 percent), Fabricated metal products (1.5 percent), Computer and electronic products (5.7 percent), and Electrical equipment, appliances and components (3.4 percent).
(Census Bureau/DOC data from “Manufacturers’ Shipments, Inventories and Orders (M3-1 (08)-07, CB08-130),” released August 27, 2008; next release is September 25, 2008) http://www.census.gov/indicator/www/m3/adv/pdf/durgd.pdf
In July 2008, The Producer Price Index (PPI) for finished goods, except foods and energy, rose 0.7 percent after edging up 0.2 percent in June. The index for finished energy goods jumped 3.1 percent in July following a 6.0 percent rise in the previous month.
The index for gasoline decreased 0.2 percent in July compared with a 9.0 percent surge in June. Conversely, slightly counteracting the deceleration in finished energy goods prices, the index for residential electric power climbed 2.0 percent subsequent to a 0.8 percent gain in June.
The index for finished consumer goods, except foods and energy, edged up 0.6 percent in July, after increasing by 0.3 percent in June. The index for finished consumer foods edged up 0.3 percent in July following a 1.5 percent rise in the prior month.
Institute for Supply Management's (ISM) Index Updated
In August 2008, the ISM index of manufacturing registered 49.9 percent, a decrease of 0.1 percentage point when compared to July’s seasonally adjusted reading of 50 percent. An index above 50 percent indicates that the manufacturing economy is generally expanding; an index below 50 percent indicates that it is generally contracting.
Economic activity in the manufacturing sector failed to grow in August, while the overall economy expanded for the 82st consecutive month, say the nation’s supply executives in the latest Manufacturing ISM Report On Business®.
The changes in the components of the ISM index in August were: New Orders up 3.3 percent, Production down 0.8 percent, Employment down 2.2 percent, Supplier Deliveries down 4.8 percent, and Inventories up 4.3 percent.
Prepared by
Office of Competition and Economic Analysis
Manufacturing and Services
International Trade Administration
U.S. Department of Commerce
(202) 482-3699
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