Economic Report: Up and Down Data: Personal Spending Rises, Even as Income Falls
Monday, October 5, 2020
Posted by: Alyce Ryan
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 5, 2020
NAM Weekly Toplines:
- Personal consumption expenditures rose 1.0% in August, increasing (but slowing) for the fourth straight month. The saving rate fell to 14.1% but remained well above the 7.5% average in 2019, suggesting that consumers remain cautious in their spending despite progress in the economy.
- Meanwhile, personal income decreased 2.7% in August, the biggest monthly decline since May. The data reflect declining transfer payments, with unemployment insurance falling from $1.32 trillion in July to $633.5 billion in August. Total wages and salaries rose 1.3% in August.
- Consumer confidence rose in September to six-month highs in surveys from the Conference Board and the University of Michigan and Thomson Reuters, with improvements in the labor market and household finances. This was especially true for Americans with higher incomes.
- Manufacturers added 66,000 workers in September, rising for the fifth straight month but with employment still down by 647,000 since February. Nonfarm payrolls rose by 661,000 in September, somewhat below consensus estimates despite increasing for the fifth consecutive month.
- The overall labor market data provided mixed results. On the one hand, the unemployment rate dropped to 7.9% in September, continuing the recovery seen since April’s 14.7% reading. Yet, the percentage of the unemployed suggesting that they lost their job permanently rose from 3,411,000 in August to 3,756,000 in September, the highest since May 2013.
- After expanding at the fastest pace since November 2018 in August, the ISM® Manufacturing Purchasing Managers’ Index® slowed somewhat in September, down from 56.0 to 55.4. New orders and production expanded solidly despite some easing, but employment remained negative and raw material prices accelerated.
- The Dallas Federal Reserve Bank reported that manufacturing activity in its district expanded in September at the fastest pace since November 2018, mirroring other regional surveys.
- New factory orders rose 0.7% in August, but sales of manufactured goods have fallen 5.4% over the past 12 months. More encouragingly, new orders for core capital goods—a proxy for capital spending in the U.S. economy—increased 1.9% in August, with 3.0% growth year-over-year.
- Private manufacturing construction spending rose 2.2% to $76.59 billion in August. Nonetheless, construction in the sector has decreased 4.6% from $80.30 billion in August 2019.
- In advance statistics, the goods trade deficit rose to $82.94 billion in August, an all-time high. In August, the increase in goods imports outpaced the rise in goods exports, pushing the goods trade deficit higher. Each has bounced back following steep declines in the spring due to the COVID-19 pandemic and global recession, with goods exports and imports rising to the best reading since March and January, respectively. Final data will be released on Oct. 6.
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