Monday Economic Report: Manufacturing Value-Added Output Rose to a Record $2.52 Trillion in Q2:2021

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 4, 2021

NAM Weekly Economic Toplines:

The U.S. economy  grew  6.7% at the annual rate in the second quarter. Real value-added output in manufacturing rose by an annualized 5.5% in the second quarter, with the sector accounting for 11.1% of real GDP. Manufacturing value-added output increased from $2.444 trillion in the first quarter to $2.525 trillion in the second quarter, an all-time high. Both durable goods and nondurable goods set new records. Real value-added output in manufacturing rose to a record $2.329 trillion in the second quarter, as expressed in chained 2012 dollars. The current forecast is for 5.8% growth in 2021 overall, with real GDP rising 3.8% in 2022. In addition, real GDP should rise by 4.5% in the third quarter, downshifting somewhat from prior estimates due to challenges related to supply chain disruptions and rising COVID-19 cases. The  ISM®  Manufacturing Purchasing Managers’ Index®   expanded robustly once again, with the headline index rising from 59.9 in August to 61.1 in September. New orders and production remained solid, albeit with some easing in the latter. The employment data were consistent with challenges in hiring, with 47% noting difficulties in increasing their workforce. The ISM® survey noted continuing concerns with supply chain disruptions, rising costs and workforce shortages. Prices accelerated in September, even as they have pulled back from June’s pace, which was the fastest since July 1979. New orders for durable goods  jumped 1.8% to a record $263.5 billion in August, buoyed by strength in nondefense aircraft and parts sales, which can be highly volatile month to month. Excluding transportation equipment, new durable goods orders increased 0.2% to $182.7 billion, also an all-time high. Nondefense capital goods excluding aircraft—a proxy for capital spending in the U.S. economy—rose to a record $77.1 billion in August. This increase marked an encouraging sign that businesses are investing at a very healthy pace, consistent with an  optimistic outlook  for the coming months. It also mirrored—in my view—the record pace of  job openings  in the sector, with firms also investing more in human capital.  Private manufacturing construction spending  declined 1.7% to $73.63 billion in August, a four-month low. Relative to pre-pandemic levels, private manufacturing construction has declined 3.3% from $76.16 billion in February 2020. Personal consumption expenditures  increased 0.8% in August, rebounding after edging down by 0.1% in July. Since February 2020, personal spending has increased a solid 7.7%. Meanwhile, personal income rose 0.2% in August, with wages and salaries increasing 0.5% for the month. Since February 2020, manufacturing wages and salaries have increased 4.8%.  Consumer confidence  fell to the lowest level since February, declining from 115.2 in August to 109.3 in September, according to the Conference Board. Americans felt less upbeat about the current and future economy, largely on concerns about the spread of the delta variant and on inflationary worries. The  PCE deflator  rose 0.4% in August, and excluding food and energy prices, the PCE deflator increased 0.3% in August. Overall, the PCE deflator has risen 4.3% year-over-year, the greatest increase since January 1991. Core inflation has increased 3.6% since August 2020, the same year-over-year pace as in June and July, remaining the fastest pace of inflation since May 1991. I continue to expect the Federal Open Market Committee to announce that it will start tapering its asset purchases at its November 2–3 meeting, with a possible interest rate hike in mid-2022. READ FULL REPORT