Economic Report: Manufacturing Production Contracted Slightly for the First Time Since June 2020

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 – July 25, 2022

NAM Weekly Economic Toplines:

New residential construction activity  declined 2.0% to 1,559,000 units at the annual rate in June, the slowest pace in nine months, and new single-family housing starts dropped 8.1% to 982,000 units, the slowest pace since June 2020. On a year-over-year basis, new housing starts have fallen 6.3% from 1,664,000 units in June 2021, with single-family construction activity plummeting 15.7% over the past 12 months.    New housing permits—which are a proxy for future residential construction—decreased 0.6% to an annualized 1,685,000 units in June, also a nine-month low, and single-family permits declined 8.0% to 967,000 units, a pace not seen since July 2020. Existing home sales  fell 5.4% to 5.12 million units at the annual rate in June, declining for the fifth straight month to the slowest pace since June 2020. On a year-over-year basis, existing home sales have plummeted 14.2% from 5.97 million units in June 2021. Nonetheless, the median sales price was $416,000 in June, an all-time high and up 13.4% from one year ago. These figures continue to reflect significant weakening in the housing market, which has been rocked by sharply higher mortgage rates, issues surrounding affordability of housing units and renewed uncertainties in the economic outlook. On these concerns,  builder sentiment  and traffic for potential buyers were the lowest since May 2020. Meanwhile, manufacturing production contracted slightly for the first time since June 2020, pulling the  S&P Global Flash U.S. Manufacturing PMI  somewhat lower and down to the weakest growth rate in two years. New orders and exports also declined at faster rates in July, and hiring softened. Manufacturers continue to grapple with geopolitical challenges, supply chain bottlenecks, workforce shortages and soaring costs. With that said, the index for future output signaled cautious optimism for production over the next six months, albeit at the weakest outlook since October 2020. Raw material costs eased somewhat in July but remained very elevated. On the regional front, the Philadelphia Federal Reserve Bank’s composite index of general business conditions  contracted  for the second straight month. New orders deteriorated further, with inventories and unfilled orders also negative. Hiring and the average employee workweek slowed. At the same time, the forward-looking composite index dropped to the weakest reading since December 1979. Overseas, the  S&P Global Flash Eurozone Manufacturing PMI  contracted for the first time since June 2020, declining from 52.1 in June to 49.6 in July. New orders, exports, output and future output reflected deteriorating activity, falling at the fastest paces since the start of the pandemic and continuing to be impacted negatively by the ongoing Russian invasion in Ukraine and by soaring costs, especially for energy. Texas  created  the most net new manufacturing jobs in June and added the most employees in the sector over the past 12 months. In June, Minnesota had the lowest unemployment rates nationally (1.8%). READ FULL REPORT