Economic Indicators For Manufacturing Executives

Transcription

1 Economic Indicators For Manufacturing Executives Valuable Data for a Complex World Presented by: Cliff Waldman Chief Economist, MAPI Foundation cwaldman@mapi.net

2 Today s Presentation The Value of Economic Data for Manufacturers Sources of Economic Data Data Construction Issues Gross Domestic Product and Components Labor Market Industrial Production Institute for Supply Management Manufacturing Report Housing Starts/Permits/Other Housing Indicators Foreign Economies Constructing a Picture

3 The Value of Economic Data for Manufacturers Economic Picture Matters to Capital Goods Demand Drawing a Picture; Strengths and Weaknesses Price and Supply Issues: What is the Pricing and Sales Climate for My Output?

4 Sources of Economic Data Government Agencies Trade Associations Economic Forecasting Groups Markets Anecdotes, Yes: But Take Them With a Grain of Salt! Business Media: But Not as a Primary Source

5 The Construction of Economic Data Definitions are at the Root of the Indicator System: What is a House? What is a Job? What is a Business? Surveys are the Essential Tool These are Statistical Estimates With Strengths and Weaknesses Some Indicators are Constructed Artifacts and Derivatives of Other Indicators

6 Issues With All Indicators: Lag, Revision, Volatility, Adjustment Data are Never Contemporaneous Revisions Volatility Seasonal Adjustment Some Data Series are Adjusted for Price Changes, Some are Not

7 Gross Domestic Product (GDP) Total Output of Goods and Services (Valued at Market Prices) Produced by Labor, Capital, and Land Within A Country s Borders Measure of Current Production, Not Sales; Measure of Output for Final Users In the U.S., GDP Data is Produced by the Bureau of Economic Analysis (BEA), a Branch of the U.S. Department of Commerce Go To: to Find This Report Quarterly Release, First One at the End of the Month Following the Quarter, Subsequent Revisions Seasonal Adjustment Price Adjustment: Nominal and Real GDP Interpretation Issues: Actual Versus Potential Potential GDP: Stable, Non-Inflationary Growth; A Function of Labor Force Growth and Labor Productivity Growth

8 NIPA: A System of Accounting for the Sources of Growth Component/Annualized Growth 2016 Q Q Q1 GDP Personal Consumption Expenditures Net Exports of Goods & Services 2016 Q Q Exports Goods Goods Durable Goods Services Nondurable Goods Imports Services Goods Q1 Gross Private Domestic Investment* Services Fixed Investment Government Consumption Expenditures and Investment Nonresidential Federal Structures National Defense Equipment Nondefense Intellectual Property Products State and Local Residential Source(s): U.S. Bureau of Economic Analysis

9 How Much Are Each of the Sources Contributing? Component/Percentage Points of Growth to GDP 2016 Q Q Q1 Gross Domestic Product (%) Personal Consumption Expenditures Net Exports of Goods & Services 2016 Q Q Q Exports Goods Goods Durable Goods Services Nondurable Goods Imports Services Goods Gross Private Domestic Investment* Services Fixed Investment Government Consumption Expenditures and Investment Nonresidential Federal Structures National Defense Equipment Nondefense Intellectual Property Products State and Local Residential Source(s): U.S. Bureau of Economic Analysis

10 Labor Market The Monthly Report on Labor Market Activity, Released on the First Friday of Each Month by the Bureau of Labor Statistics (BLS) Go To: to Get This Report Indicators that Receive the Most Attention Include: o Civilian Unemployment Rate o Measures of Net Job Creation o Average Weekly and Hourly Earnings o Labor Force Participation Rate---A Big Deal in This Cycle! Many Others of Great Value: Duration of Unemployment and Part-Time Employment-To Name a Few Economy-Wide Data But Also for Sectors, Industries, and Demographic Groups

11 Labor Market Two monthly surveys: Current Population Survey (CPS) and Current Employment Statistics Survey (CES). In both, Respondents are Queried for Either the Calendar Week or the Pay Period that Includes the 12 th of the Month. The CPS is a Household Survey of about 60,000 households. The Most Notable Output of the CPS Survey Program is the Unemployment Rate CPS Uses a Broad Definition of Employment. o Employed: Individual Has Done Any Work At All, for Pay or Profit, During the Survey Week o Unemployed: Individual Does Not Have a Job, Has Actively Looked for Work During the Prior 4 Weeks, and Currently Available for Work One Exception: Workers Expected to be Recalled from a Temporary Layoff are Counted as Unemployed Whether or Not They Have Engaged in Specific, Job-Seeking Activity

12 Labor Market The CES Survey is a Survey of about 147,000 Establishments (634,000 individual worksites). It is the Basis for Monthly Estimates of Employment, Hours, and Earnings for the Nation, States, and Major Metropolitan Areas. Employment is Total Number of Persons on Establishment Payrolls Who Received Compensation for any Part of the Pay Period that Includes the 12th of the Month o Part-time Workers are Included o Temporary and Intermittent Employees Included o Employees Who are on Paid Sick Leave or Paid Holiday Included o Multiple Job Holders are Counted Once for Each Job o If A Striking Employee Works a Small Portion of the Survey Period and is Paid, That Employee is Included Revisions A Key Challenge: Employment Generated By New Firms

13 The Unemployment Rate is a Tricky Indicator: It Can Move for Good and Bad Reasons Unemployment Rate Unemployment Rate May-48 May-50 May-52 May-54 May-56 May-58 May-60 May-62 May-64 May-66 May-68 May-70 May-72 May-74 May-76 May-78 May-80 May-82 May-84 May-86 May-88 May-90 May-92 May-94 May-96 May-98 May-00 May-02 May-04 May-06 May-08 May-10 May-12 May-14 May-16 Source(s): Bureau of Labor Statistics

14 Job Growth is Volatile But Within a Range Total U.S. Nonfarm Job Creation, Thousands One Month Change May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Source(s): U.S. Bureau of Labor Statistics

15 Labor Supply is a Big Issue in This Cycle of U.S. Recovery U.S. Labor Force Participation Rate, 16 Years and Older Percent Feb-51 Feb-53 Feb-55 Feb-57 Feb-59 Feb-61 Feb-63 Feb-65 Feb-67 Feb-69 Feb-71 Feb-73 Feb-75 Feb-77 Feb-79 Feb-81 Feb-83 Feb-85 Feb-87 Feb-89 Feb-91 Feb-93 Feb-95 Feb-97 Feb-99 Feb-01 Feb-03 Feb-05 Feb-07 Feb-09 Feb-11 Feb-13 Feb-15 Source(s): U.S. Bureau of Labor Statistics

16 Manufacturing: Industrial Production Industrial Production (IP) is Output of Manufacturing, Mining, and Electric and Gas Utilities Manufacturing is the Largest Component Monthly Report (Mid-Month), Seasonally Adjusted, Price Adjusted Constructed as an Index Go to Report Contains Data on Total IP As Well as Major Sectors, Major Markets, and Major Industries Five Revisions for Each Monthly Number! o About 85 Percent of the Time, the Direction of Change in Output Indicated by the First Estimate is the Same as for the Fourth Annual Revisions Provided Most Years and Announced in the Release Report Also Contains Capacity Utilization - A Measure of Slack Capacity Utilization is Output as a Percent of Sustainable Maximum Output (Output Index/Capacity Index)

17 Quarterly Data Make the Most Sense With the Industrial Production Series U.S. Manufacturing Production Growth, Seasonally Adjusted at Annual Rate Percent Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1 Source(s): Federal Reserve Board

18 Institute for Supply Management Manufacturing Report Widely Followed Survey by Institute for Supply Management (ISM) on Short-Term Business Cycle Status of Manufacturing Sector Released on the First Business Day of the Month. Go to: Indicators Include: New Orders, Production, Backlog of Orders, New Export Orders, Imports, Supplier Deliveries, Inventories, Customer Inventories, Employment, and Prices A Diffusion Index is Calculated for Each Indicator: Percent Reporting a Positive Change Plus Half Reporting Same The Total Purchasing Managers Index is a Composite of New Orders, Production, Employment, Supplier Deliveries, and Inventories. Fifty (50) Percent is the Dividing Line Between Growth and Contraction. ISM has Similar Survey for Non-Manufacturing:

19 The Purchasing Managers Index Points to Acceleration in U.S. Manufacturing Growth Purchasing Managers Index for U.S., Manufacturing Percent Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Source(s): Institute for Supply Management

20 Housing: Starts, Permits, and Other Indicators Report on New Residential Construction Generated by Census Bureau in Conjunction with Department of Housing and Urban Development Released Around the 20th of Each Month Go To: Two Key Data Series: Housing Starts and Building Permits. o Housing Unit : An Apartment, a Group of Rooms, or a Single Room Intended for Occupancy as a Separate Living Quarters. o Building Permits: Good Leading Indicator of the Market New Home Sales: Existing Home Sales: Pending Home Sales, A Measure of Housing Contract Activity:

21 The Residential Construction Rebound Has Been Choppy U.S. New Building Permits, Seasonally Adjusted Annual Rate 1,600 1,400 1,200 1,000 Thousands May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Source(s): U.S. Bureau of the Census

22 A Permanent Empirical Record of the Housing Collapse Total New Single Family Homes Sold, U.S., Seasonally Adjusted at Annual Rate 1,450 1,350 1,250 1,150 1,050 Thousands Apr-73 Apr-75 Apr-77 Apr-79 Apr-81 Apr-83 Apr-85 Apr-87 Apr-89 Apr-91 Apr-93 Apr-95 Apr-97 Apr-99 Apr-01 Apr-03 Apr-05 Apr-07 Apr-09 Apr-11 Apr-13 Apr-15 Apr-17 Source(s): U.S. Bureau of the Census

23 Non-U.S. Data Central Bank Websites Central Data Collection Organizations World Bank, Other Development Banks, International Monetary Fund Seasonal Adjustment is Often Weak Outside of the U.S. Longer Reporting Lags than in the U.S. Often More Revision than in the U.S. Be Careful With International Comparisons-Many Issues!

24 Constructing a Picture Graph Your Data Calculate Moving Averages Ask Questions and Find Contradictions Use Data Experts; Get to Know the Experts in Key U.S. Statistical Agencies Use Economic Experts