Weaker Factory Orders in November ǀ Trade Deficit Eased from 10-Year High
New orders for manufactured goods fell by 0.6 percent in November, extending the 2.1 percent decline seen in October. In addition, new orders for core capital goods (or nondefense capital goods excluding aircraft)—a proxy for capital spending in the U.S. economy—continued to pull back from the all-time high reached in July. This suggests some softness in capital spending in the economy, which is disappointing.
However, core capital goods spending has increased by a relatively healthy 6.1 percent over the past 12 months, and overall, factory orders rose a modest 4.1 percent year-over-year.
The U.S. trade deficit eased from its highest rate in 10 years, down from $55.70 billion in October to $49.31 billion in November. Considerable decreases in imports for cell phones and other household goods and petroleum products helped to explain the sharp decline in goods imports in November, with each factor rather volatile from month to month.
More importantly, U.S.-manufactured goods exports rose 5.9 percent through the first 11 months of 2018 relative to the pace at the same timeframe in 2017. That suggests that manufacturing exports have continued to build on the rebound in international demand that started last year.
Manufacturing labor productivity grew 1.3 percent in the fourth quarter, expanding for the third straight month. With that said, output in the sector slowed from 4.1 percent growth in the third quarter to 2.3 percent in the fourth quarter. Labor productivity in the sector rose 0.6 percent in 2018, or just slightly above the average seen over the past three years (0.5 percent). This remained less than desired and certainly below the rates seen in prior economic recoveries.
Some developments of note regarding economic data releases in light of the recent partial government shutdown:
Retail trade – December retail sales data will be released next week on February 14.
Fourth quarter real GDP – Preliminary data were to have been released on January 30. Instead, the Bureau of Economic Analysis (BEA) will completely forego that release, and instead, produce an “initial” read on February 28. This would have previously been the first revision. (I continue to expect this to be around 2.6 percent.)
Real GDP by industry – This will now be released on February 21 for the third quarter. Manufacturing had value-added output of $2.33 trillion in the second quarter of 2018, an all-time high.
Personal income and spending – BEA will now release this data, along with the personal consumption expenditures (PCE) deflator, on March 1. That release will include personal income data for both December and January.
International trade in goods – The December trade data will now come out on March 6, about a month later than normal. This will give us our first read on U.S.-manufactured goods exports for 2018, with updated seasonal adjusted data released on TradeStats Express subsequent to that.