Monday Economic Report: Manufacturing Output: Strongest Since January 2019 Despite Slowing in August

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 – September 20, 2021

• Manufacturing production slowed significantly in August, edging up 0.1% for the month after rising by 1.6% in July. Much like the larger economy, manufacturing production has softened likely due to supply chain disruptions, workforce shortages and rising raw material costs. Still, manufacturing production has increased 5.9% over the past 12 months, or 3.2% year to date, with output in the sector the strongest since January 2019.

• Similarly, manufacturing capacity utilization edged up from 76.6% in July to 76.7% in August, also the best reading since January 2019. Looking at annual average growth rates, I would expect that manufacturing production will have risen by 6.8% in 2021, with 4.2% growth in 2022.

• Regional surveys from the New York and Philadelphia Federal Reserve Banks reflected stronger manufacturing expansions in September, with a positive outlook for the next six months. The forecast for capital spending in the Empire State release was the best since January 2018, with technology spending seen rising at a record pace. Yet, delivery times and pricing pressures remained significant challenges in both districts.

• Retail sales rose 0.7% in August, rebounding from the 1.8% decline seen in July and continuing the seesaw pattern seen over the past five months. Motor vehicle and parts dealers reported 3.6% fewer sales in August, with the chip shortage and supply chain issues hindering spending in that category. Excluding motor automobiles, retail spending increased 1.8% for the month.

• Spending at retailers was boosted by very robust growth at non-store retailers (up 5.3%), among others. Spending at food services and drinking places was flat in August, slowing from the 1.3% gain seen in July and likely dampened by rising delta variant cases of COVID-19 in some markets around the country.

• Consumer prices rose 0.3% in August, the slowest monthly increase since January. Excluding food and energy, core consumer prices edged up 0.1% in August, the weakest pace since February. Prices for used cars and trucks and transportation services, both of which soared sharply earlier in the year, declined in August. New vehicle prices were higher.

• The consumer price index has risen 5.2% year-over-year, pulled back from 5.3% in June and July, which was the fastest year-over-year pace since September 2008. Likewise, core inflation increased 4.0% year-over-year in August, decelerating for the second straight month from 4.5% in June, the highest since November 1991.

• Small business owners continue to experience record-level challenges with prices and employment, according to the National Federation of Independent Business. Half of all respondents in the August survey said that they had job openings that they were unable to fill, with 60% saying that there were few or no qualified applicants, also an all-time high.

• Kentucky created the most net new manufacturing jobs in August, adding 5,700 workers. Post-pandemic onset, Utah has generated the most employment in the sector, adding 8,100 workers over the past 18 months. Nebraska had the lowest unemployment rate (2.2%).

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