Manufacturing Assessment
Rocky Mountain Economic Summit Victor, ID July 13, 2017
William Strauss Senior Economist and Economic Advisor Federal Reserve Bank of Chicago
GDP expanded by 2.1% over the past year
Real gross domestic product percent
8 6
4 2 0
-2 -4
Percent change from a year earlier
-6 -8
Quarterly change (saar)
-10 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
The Chicago Fed National Activity Index 3-month average is at zero Chicago Fed National Activity Index 2.0 1.0 0.0 -1.0 -2.0
Three month average
-3.0 -4.0 Monthly
-5.0 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Employment increased by over 2.2 million jobs over the past 12 months Total employment percent
4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7
Percent change from a year earlier
Quarterly change (saar) 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Slow productivity growth helps explain why relatively strong employment growth has not translated into higher wages Productivty percent change (20-qtr ra te)
5 4 3 2 1 0 -1 1950
'55
'60
'65
'70
'75
'80
'85
'90
'95
'00
'05
'10
'15
A large part of the weakness in productivity growth has been the weak pace of investment Real private nonresidential fixed investment percent
20
10 0 -10
Percent change from a year earlier
-20 Quarterly change (saar)
-30 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Declines in manufacturing output were broad-based during the Great Recession – especially in vehicle and primary metals manufacturing Industrial output: December 2007 - June 2009 percent change
-60 Manufacturing Durable Goods Wood Products Nonmetallic Mineral Products Primary Metals Fabricated Metal Products Machinery Computer and Electronic Components Electrical Eqpt, Appliances & Components Motor Vehicles and Parts Aerospace & Miscellaneous Transport Equip Furniture and Related Products Miscellaneous Durable Goods Nondurable Manufacturing Food, Beverages, and Tobacco Textile and Product Mills Apparel and Leather Goods Paper Printing and Related Support Activities Chemicals Petroleum and Coal Products Plastics and Rubber Products Other Manufacturing
-50
-40
-30
-20
-10
0
The recovery has also been broad-based with motor vehicles, computer and electronic components, primary metals and machinery manufacturing leading the way Industrial output: June 2009 - May 2017 percent change
-50 -25 Manufacturing Durable Goods Wood Products Nonmetallic Mineral Products Primary Metals Fabricated Metal Products Machinery Computer and Electronic Components Electrical Eqpt, Appliances & Components Motor Vehicles and Parts Aerospace & Miscellaneous Transport Equip Furniture and Related Products Miscellaneous Durable Goods Nondurable Manufacturing Food, Beverages, and Tobacco Textile and Product Mills Apparel and Leather Goods Paper Printing and Related Support Activities Chemicals Petroleum and Coal Products Plastics and Rubber Products Other Manufacturing
0
25 50 75 100 125 150 175
Over the past couple of years, the real trade-weighted dollar increased by 15.9% Trade-weighted exchange value of the U.S. dollar (real) i ndex: Ma rch 1973=100
115 110 105 100 95 90 85 80 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Manufacturing output has started to increase after being unchanged for the past couple of years Industrial production - manufacturing percent
40 30
Monthly change (saar) Percent change from a year earlier
20 10 0
-10 -20
-30 -40 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Manufacturers’ Purchasing Managers Indexes Jul-16
Aug-16
S e p-16
Oct-16
N ov-16
D e c-16
Ja n-17
Fe b-17
Ma r-17
Apr-17
Ma y-17
Jun-17
Globa l
51.0
50.8
51.0
52.0
52.1
52.7
52.7
53.0
53.0
52.7
52.6
52.6
U nite d S ta te s
52.9
52.0
51.5
53.4
54.1
54.3
55.0
54.2
53.3
52.8
52.7
52.0
Ca na da
51.9
51.1
50.3
51.1
51.5
51.8
53.5
54.7
55.5
55.9
55.1
54.7
Me xico
50.6
50.9
51.9
51.8
51.1
50.2
50.8
50.6
51.5
50.7
51.2
52.3
E urozone
52.0
51.7
52.6
53.5
53.7
54.9
55.2
55.4
56.2
56.7
57.0
57.4
Ge rma ny
53.8
53.6
54.3
55.0
54.3
55.6
56.4
56.8
58.3
58.2
59.5
59.6
Fra nce
48.6
48.3
49.7
51.8
51.7
53.5
53.6
52.2
53.3
55.1
53.8
54.8
Ita ly
51.2
49.8
51.0
50.9
52.2
53.2
53.0
55.0
55.7
56.2
55.1
55.2
S pa in
51.0
51.0
52.3
53.3
54.5
55.3
55.6
54.8
53.9
54.5
55.4
54.7
UK
48.2
53.3
55.4
54.2
53.6
56.1
55.7
54.5
54.2
57.3
56.7
54.3
R ussia
49.5
50.8
51.1
52.4
53.6
53.7
54.7
52.5
52.4
50.8
52.4
50.3
Ja pa n
49.3
49.5
50.4
51.4
51.3
52.4
52.7
53.3
52.4
52.7
53.1
52.4
China
50.6
50.0
50.1
51.2
50.9
51.9
51.0
51.7
51.2
50.3
49.6
50.4
India
51.8
52.6
52.1
54.4
52.3
49.6
50.4
50.7
52.5
52.5
51.6
50.9
Bra zil
46.0
45.7
46.0
46.3
46.2
45.2
44.0
46.9
49.6
50.1
52.0
50.5
Manufacturing added 49,000 jobs over the past year
Manufacturing employment percent
5 0 -5 Percent change from a year earlier Percent change from a year earlier
-10 -15 Quarterly change (saar) Quarterly change (saar)
-20 1990'91 '92 '92 '93 '93'94 '94'95 '95'96 '96'97 '97'98 '98'99 '99'00 '00'01 '01'02 '02'03 '03 '04 '04 '05'05 '06'06 '07'07 '08'08 '09'09 '10'10 '11'11 '12'12 '13'13 '14'14 '15 '15 '16 '16 '17
Capacity utilization has been improving
Capacity utilization - manufacturing percent
86 84 82 80 78 76 74 72 70 68 66 64 62 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
The supply managers’ composite index continues to signal a solid expansion Purchasing managers' index - composite net percent reporting i ncreases
65 60 55 50 45 40 35 30 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
The industrial sector output growth has been improving over the past several months Current 3 Month Moving Average Growth is: Above Trend and Accerating Above Trend and Decelerating Below Trend and Accelerating Below Trend and Decelerating Contracting but Improving Contracting and Deteriorating
Manufacturing Industries Activity Chart Growth (3-month moving average) compared with the most recent 5-year trend 2012
Manufacturing Wood Products Nonmetallic Mineral Products Primary Metals Fabricated Metal Products Machinery Computer and Electronic Components Electrical Eqpt, Appliances & Components Motor Vehicles and Parts Aerospace & Misc. Transport Equip Furniture and Related Products Miscellaneous Durable Goods Food, Beverages, and Tobacco Textile and Product Mills Apparel and Leather Goods Paper Printing and Related Support Activities Chemicals Petroleum and Coal Products Plastics and Rubber Products
0.9% 3.4% 3.2% -0.9% -0.3% -2.3% 3.1% 0.6% 5.3% 0.8% 1.1% -0.4% 1.7% 0.9% -6.2% -0.9% -0.4% -0.3% 1.7% 1.4%
2013
2014
2015
2016
2017
Industrial production is forecast to improve but expand at a pace a bit below its historical rate Total industrial production percent
10
Percent change from a year earlier
5 0 Q1-2017
-5
Blue Chip IP Forecast
-10 Actual 2016 -0.1
-15 -20
Forecast 2017 2018 2.7 2.3
Quarterly change (saar)
-25 2000 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18
Light vehicles sales set a record in 2016 edging up 0.4% from 2015 – 2017 year-to-date sales were 1.3% lower than a comparable period of year earlier Light vehicle sales mi l lions of units (saar)
22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Consumer spending on energy are well below the historical average Energy goods and services expenditures as a share of percent total consumption 10 9 8
80s
60s
7
70s
1960-2017
6 5 90s
4
10s
00s
3 1960
'65
'70
'75
'80
'85
'90
'95
'00
'05
'10
'15
Year-to-date light truck sales are 5.7% higher than a year earlier, while passenger car sales are 11.7% lower Passenger car and light truck sales mi l lions of units (saar)
13
12 11 10
light trucks passenger cars
9 8
7 6
5 4 3 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Light truck market share is at a record high
Light truck share of light vehicle market sales percent
70 65 60
55 50
45 40 35 30 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Domestically produced sales are higher than in 1980
Share of light vehicle sales percent
percent
100
100 imports
90
90
80
80
70
70 new domestics
60
60
50
50
40
40 Detroit-3
30
30
20
20
10
10
0
0 1980
'83
'86
'89
'92
'95
'98
'01
'04
'07
'10
'13
'16
Days supply of vehicles are somewhat higher than desired, especially for passenger cars Passenger car and light truck days supply da ys
120
110
light trucks
100
90 80
70 60 50 40 30
passenger cars 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Automotive production growth has slowed
Industrial output - consumer autos and trucks percent change from a year earlier
125 100
75 50 25
0 -25
-50 -75 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
New vehicle price increases remain low
Consumer price index - new vehicles percent change from a year earlier
6 5 4 3 2 1 0 -1 -2 -3 -4 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
The automobile delinquency rate from direct loans are rising, but remain very low Delinquency rate - automobile direct loans percent
3.5 3.0
2.5 2.0 1.5
1.0 0.5 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
The automobile delinquency rate from indirect loans have also been rising, but also remain low Delinquency rate - automobile indirect loans percent
3.75
3.50 3.25 3.00 2.75 2.50
2.25 2.00
1.75 1.50 1.25 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Alternative powered vehicles (including hybrids) are a very small fraction of total vehicle sales Power-Type percent of total sales
100
90
Gasoline and Diesel
80 70 60 50
40 30
20 10
Alternative
0 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Alternative powered vehicles (including hybrids) market share barely exceeded 4% and have been declining over the past two years Alternative Powered Vehicles percent of total sales
5 4 3
2 1 0 1990'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17
Vehicle sales are anticipated to edge lower over this year and in 2108 Vehicle sales mi l lions of units
18 17 16 15 14 Blue Chip Light-Vehicle Sales Forecast
13 12
Actual 2016 17.5
11
Forecast 2017 2018 17.0 16.9
10 1980
'85
'90
'95
'00
'05
'10
'15
Summary •Manufacturing output is expected to increase at a rate below trend this year and in 2018 •Manufacturing employment is likely to increase at a modest pace •Vehicle sales are anticipated to move lower through 2018
www.chicagofed.org www.federalreserve.gov