October 2, 2013
The doves have been set loose but that doesn’t mean it’s time to celebrate (Part 2)
Kayoed by the recession, many prospective purchasers are still obsessed with lowering their debt and they’ve now lost some of their zeal to get back into homeownership.
Before the Fed reduces its monetary stimulus, it will need to be convinced the economic recovery is firmly on higher ground.
Initial jobless claims for the latest two weeks will help sell that argument.
For the week ending Sept. 7, they were 294,000, the first figure below 300,000 in six years. In the next seven-day period, they rose slightly to 309,000, but were still the second-lowest dating back to 2007.
Production estimates for total industry and manufacturing are calculated by the Federal Reserve.
In August, the month-to-month changes were +0.4% for total industry and +0.7% for manufacturing. Both were respectable rates of change. Year-over-year, the respective increases were +2.7% and +2.6%, again noteworthy gains.
The capacity utilization rate for total industry in the U.S. is now 77.8%, up marginally from 77.2% in August 2012. For manufacturing, the usage figure is 76.1%, also ahead slightly versus 75.1% a year ago. These levels need to rise above 80.0%, however, before there will be much of an improvement in the new-plant construction outlook.
Motor vehicle sales in the U.S. are very strong, manufacturing employment is at least stable (+0.2% year-over-year) and the Purchasing Managers’ Index (55.7%) of the Institute of Supply Management (ISM) is nicely over the 50.0% benchmark that indicates both the overall economy and its manufacturing sub-sector are expanding.
If anything, slippage in some key economic numbers is more evident in Canada than in the U.S. Manufacturing sales in July were +1.7% month-to-month, but that still left them -0.1% year-over-year.
In current dollar terms, Canadian manufacturing sales reached a plateau in mid-2011 and have been flat subsequently. In constant-dollar terms, they’ve been on a gentle downward slide.
Manufacturing employment year-over-year in August was -2.9%.
The capacity utilization rate in manufacturing in this year’s second quarter eased minimally, to 79.2% from 79.4% in Q1. In the same month of 2012, the level was 81.9%.
Nevertheless, there are indications that the nation’s industrial sector is about to embark on more investment spending. Ford Motor Company has announced a $700 million package of improvements in Oakville to prepare an existing plant for next-generation automobiles.
The emphasis will be on “global platforms” that permit easier switching between model lines in response to segments of the market that display more demand.
And Vale Inco plans over a billion dollars in construction spending (with more to come on machinery and equipment) at its base metals processing plant in Long Harbour, Newfoundland and Labrador.
This facility is scheduled for completion by 2016 in order to comply with the company’s commitment to carry out processing from Voisey’s Bay mine extraction in the province.
Grand total industrial capacity usage in Q2 in Canada was 80.6%, again about even with Q1 (80.4%) and marginally below Q2 of last year (81.3%).
industry group – manufacturing
Data Source: Statistics Canada / Chart: Reed Construction Data – CanaData.
Industry classifications are as according to NAICS (North American Industry Classification System).