Philadelphia Fed Factory Index Rises Unexpectedly:
Manufacturing in the Philadelphia region unexpectedly increased in September, the first expansion in 10 months, as orders and shipments improved and signs of inflation moderated.
The Federal Reserve Bank of Philadelphia’s general economic index advanced to 3.8 this month from minus 12.7 in August, the bank said on September 18, 2008. Economists expected a drop. Positive readings signal expansion.
Exports are helping some American factories counter softening demand in the U.S. Still, job losses, a housing recession and a credit crisis may limit any sustained gains in manufacturing output, economists said.
“Overwhelmingly exports are helping,” said Richard DeKaser, chief economist at National City Corp. in Cleveland. “Inventories are at relatively healthy levels and are no longer a weight on the factory sector.”
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
Manufacturing Wage Rates (Quarterly, Yearly)
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 August 2008, manufacturing output declined 1.0 percent from its level in July, reflecting a 1.6 percent drop in durable and 0.5 percent decline in non-durable manufacturing.
Among durable goods industries, decreases were reported in several key sector including Motor vehicles and parts (-11.9 percent); Furniture and related products (-3.0 percent); Nonmetallic mineral products (-1.0 percent); Electrical equipment, appliances, and components (-1.9 percent); and Aerospace and miscellaneous transportation equipment (-0.8 percent). The only durable goods industries to have registered gains in August were Wood products (0.4 percent); Primary metals (0.4 percent); Machinery (0.3 percent); Fabricated metal products (0.1 percent); and Miscellaneous manufacturing (0.9 percent).
The production of nondurable goods fell 0.5 percent. Declines in the indexes for Apparel and leather products (-1.0 percent); Paper (-0.5 percent); Petroleum and coal products (-1.8 percent); Chemicals (-0.2 percent); and Plastics and rubber products (-1.3 percent) more than offset increases in the indexes for Food, beverage, and tobacco products (0.1 percent); and for Printing (1.3 percent).
The index for other manufacturing industries (non-NAICS), which consist of Logging and publishing, fell 0.2 percent.
In August 2008, manufacturing industries (NAICS based) operated at 76.7 percent of capacity, 2.8 percentage points below their 1972-2007 average of 79.5 percent and 0.9 percentage points less than their revised capacity utilization in July 2008.
In durable manufacturing, capacity utilization decreased 1.4 percentage points in August from July (revised) to 74.3 percent. Capacity utilization declined in Motor vehicles and parts (-8.1 percent); Furniture and related products (-2.0 percent); Electrical equipment, appliances, and components (-1.7 percent); Computer and electronic products (-0.6 percent); Nonmetallic mineral products (-0.8 percent); and Aerospace and miscellaneous transportation equipment (-0.7 percent). Capacity utilization rose in Wood products (0.3 percent); Primary metals (0.2 percent); Machinery (0.1 percent); and Miscellaneous manufacturing (0.5 percent).
Capacity utilization in non-durable manufacturing in August fell 0.4 percentage points from July 2008 (revised) to 79.5 percent. Decreased capacity utilization was reported in Apparel and leather (-0.5 percent); Paper (-0.4 percent); Petroleum and coal products (-1.6 percent); Plastics and rubber products (-1.2 percent); and Chemical (-0.2 percent). These losses outweighed gains in Textile and product mills (0.2 percent); and Printing and support (0.9 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 July 2008, U.S. manufactured goods exports accounted for 61.1 percent of all U.S. exports of goods and services, compared with 62.3 percent a year ago. During that same period, manufactured goods exports were up 16.0 percent above year ago levels, while imports were up 5.7 percent. The trade deficit in manufactures improved to $452.5 billion (annual rate) for 2008, down from $524.4 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 August 2008, The Producer Price Index (PPI) for finished goods, except foods and energy, advanced 0.2 percent, after rising 0.7 percent in July. The index for finished energy goods fell 4.6 percent in August following a 3.1 percent increase in the previous month.
Prices for liquefied petroleum gas dropped 19.5 percent in August after rising 10.8 percent a month earlier. The indexes for residential natural gas, home heating oil, and diesel fuel, also fell following increases in July.
Conversely, slightly counteracting the overall downturn in finished energy goods, prices for finished lubricants advanced 8.6 percent in August after moving up 5.4 percent in the preceding month.
The index for finished consumer goods, except foods and energy, rose 0.2 percent in August, after increasing by 0.6 percent in July. The index for finished consumer foods edged up 0.3 percent in August, the same increase as in July.
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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