NAM: Manufacturing (CONT’D FROM PAGE 1)
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At the same time, input prices (down from 48.1 to 46.0) fell for the second time since May 2020. In contrast, the S&P Global Flash U.S. Services Business Activity Index de- clined from 54.9 to 54.1 but continued to indicate modest growth in activity and a sign of lingering resilience despite challenges in the manufacturing sector. In related news, manufacturing activity in the Kansas City Federal Reserve Bank’s district contracted for the third straight month. New orders, exports, production and the average employee workweek remained challenged, with employment falling for the second time in the past three months. Raw material costs continued to decelerate, expanding at the weakest pace since June 2020. Manufacturers in the district continued to predict rela- tively sluggish activity over the next six months, with the forward-looking composite index dropping from 2 to -2, the first negative reading since April 2020. With that said, respondents felt cautiously positive about new orders, shipments, production, hiring and capital spending growth moving forward. Manufacturers continued to predict de- cent (but slowing) growth in input costs over the coming months. There were 264,000 initial unemployment claims for the week ending June 17, unchanged from the prior week and remaining the highest since the week ending Oct. 30, 2021. At the same time, there were 1,759,000 continuing claims for the week ending June 10, down from 1,772,000 for the previous week. Consumer prices edged up 0.1 percent in May, slowing from the 0.4 percent gain in April. Energy costs decreased 3.6 percent in May, falling for the third time in the past four months, with gasoline prices down 5.6 percent. The Consumer Price Index has risen 4.0 percent over the past 12 months, down notably from 4.9 percent in April and the slowest rate since March 2021. At the same time, core inflation (which excludes food and energy) increased 5.3 percent year-over-year in May, inching down from 5.5 percent in April. Overall, consumer prices continue to show signs of moderation, particularly for headline year-over- year data, which is encouraging. Yet, pricing pressures remain stubbornly high, particularly for core consumer in- flation, which has continued to be “stickier” than preferred. For its part, the Federal Reserve needs to weigh both the good and the bad in these data points, keeping the federal funds rate at elevated levels to tighten monetary conditions even as it sees progress on year-over-year in- flation growth. The Federal Open Market Committee must also consider the impact that slowing growth and lingering credit worries might have on the economy. The Index of Consumer Sentiment rose to 63.9 in June, a four-month high. Consumers felt more positive in their assessments of both current and future conditions, boost- ed by policymakers resolving the debt ceiling standoff. That said, Americans continue to remain anxious in their economic outlook, with sentiment lower than preferred.
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July 3, 2023
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