Fleet Management

Economic Watch: Non-Manufacturing, Factory Orders, Shipments Slow

January 06, 2015

By Evan Lockridge

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Economic growth in the U.S. non-manufacturing and factory sectors slowed in December, according to two separate reports released Tuesday, possible signs the overall economy lost some steam in the final quarter of last year.

A survey of the nation’s purchasing and supply executives by the Institute for Supply Management shows economic activity in the non-manufacturing sector grew in December for the 59th consecutive month, but turned in its lowest reading since June.

The Non-Manufacturing Index registered 56.2% in December, 3.1 percentage points lower than the November reading of 59.3%, which was near a post recession high. A reading over 50% mainly indicates expansion while one below 50% usually means contraction.

“Comments from respondents are mostly positive about business conditions and the overall economy for year-end,” said Anthony Nieves, chair of the Institute for Supply Management, non-manufacturing business survey committee.

According to the NMI, the 12 non-manufacturing industries all reported growth in December.

“Service activity remained positive through the end of the year, but at a noticeably slower pace. A reoccurring theme, positive with a loss of momentum, the economy appears to be losing steam as we head into the new year with ample inventory stockpiles undermining the need for robust producer activity, and record-low oil prices undermining investment,” said Sterne Agee Chief Economist Lindsey Piegza. “Add in a sluggish housing market, and nonexistent wage pressures amid a disinflationary environment, and it may prove more difficult than expected to reach the Federal Reserve's overly optimistic growth forecast of 3% as far as the eye can see.”

Meantime, a separate report about the health of the nation’s factory sector shows declines for both shipments and new orders in November, following an advance report released just before Christmas.

Total factory shipments, down three of the last four months, decreased 0.6% in November from the month before, following a 0.9% October decrease.

Year-to-date, factory shipments are up only 0.6% since December 2013, according to the manufacturing blog ShopFloor.com.

Shipments of manufactured durable goods, those designed to last at least three years, down three of the last four months, decreased 0.6% in November, revised from the previously published 0.4% decrease. This follows a 0.1% October decrease from the month before. Transportation equipment, down following two consecutive monthly increases, led the November decline, falling 1.3%.

New orders for manufactured goods in November, down four consecutive months, fell 0.7%. This follows a 0.7% October drop from September. Excluding transportation, new orders decreased 0.6% in November from the month before.

New factory orders through the first 11 months of 2014 are 3.4% more than the average for all of 2013, according to ShopFloor.com

New orders for manufactured durable goods in November, down three of the last four months, decreased 0.9% from October to $241.6 billion, revised from the previously published 0.7% decrease. This follows a 0.3% October increase from September. Transportation equipment, also down three of the last four months, led the November decline, falling 1.3% from the month before.

The decline in new orders was bigger than a consensus forecast from a panel of economists who expected a 0.5% drop. There was no forecast for factory shipments.

The economic and freight forecasting group FTR Intel described the results as “disappointing,” in its Twitter feed, following release of the factory report.

 

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