Tags: Manufacturing | economy | business investment | income

Manufacturing Struggles as Rising Income a Bright Spot for Economy

Image: Manufacturing Struggles as Rising Income a Bright Spot for Economy
(AP)

Wednesday, 23 Dec 2015 11:00 AM

A gauge of U.S. business investment plans fell in November and the prior month's increase was revised sharply lower as the drag on manufacturing from a strong dollar and spending cuts in the energy sector showed little sign of abating.

But the outlook for the economy remains encouraging, with other data on Wednesday showing consumer sentiment at a five-month high in December and personal income rising for an eighth straight month in November.

That should support consumer spending and economic growth in the fourth quarter and early in 2016.

"The gain in income should prove a tailwind to fourth-quarter GDP growth as consumption remains the most prominent driver of domestic growth activity," said Gennadiy Goldberg, an economist at TD Securities in New York.

The Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, dropped 0.4 percent last month. October's increase in orders for these so-called core capital goods was revised down to 0.6 percent from 1.3 percent.

Manufacturing, which accounts for 12 percent of the economy, has also been hit by efforts by businesses to reduce an inventory bloat and sluggish global demand, which has curtailed new orders growth.

The dollar has gained almost 20 percent against the currencies of the United States' main trading partners over the last 18 months.

Plunging crude oil prices, which on Monday plumbed their lowest levels since 2004, have put pressure on oilfield services firms like Schlumberger and Halliburton, forcing them to slash capital spending budgets.

A survey early this month showed manufacturing contracted in November for the first time in three years. Economists polled by Reuters had forecast core capital goods orders dipping 0.1 percent last month.

Core capital goods shipments fell 0.5 percent last month after October's downwardly revised 1.0 percent drop.

Shipments of these goods are used to calculate equipment spending in the government's gross domestic product measurement. They were previously reported to have declined 0.5 percent in October.

"Unless we see a big rebound in December or upward revisions, it appears that investment in equipment contracted in the fourth quarter," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

In another report, the Commerce Department said income increased 0.3 percent last month after gaining 0.4 percent in October. Wages and salaries advanced 0.5 percent, adding to a 0.6 percent gain in October.

U.S. stocks were trading higher after the data, while prices for U.S. government debt fell. The dollar was slightly firmer against a basket of currencies.

INADVERTENT RELEASE OF DATA

A tightening labor market, marked by an unemployment rate that is in a range some Federal Reserve officials consider consistent with full employment, is starting to lift wages.

That in turn could gradually push inflation toward the Fed's 2 percent target and enable it to further raise interest rates next year. The U.S. central bank hiked its benchmark overnight interest rate last week by 25 basis points to between 0.25 percent and 0.50 percent, the first increase since mid-2006.

Last month, a price index for consumer spending was unchanged after nudging up 0.1 percent in October. In the 12 months through November, the personal consumption expenditures (PCE) price index was up 0.4 percent, the largest increase since December, after rising 0.2 percent in October.

Excluding food and energy, prices nudged up 0.1 percent after being unchanged in October. The so-called core PCE price index rose 1.3 percent in the 12 months through November, for the 11th straight month.

The Commerce Department's Bureau of Economic Analysis inadvertently released part of the consumption portion of its report late on Tuesday. It showed consumer spending increased 0.3 percent last month after being unchanged in October.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3 percent when adjusted for inflation after holding steady in October.

A third report on Wednesday showed the University of Michigan's consumer sentiment index increased to 92.6 this month, the highest reading since July, from 91.3 in November. Low inflation, which is boosting household purchasing power, accounted for the rise in sentiment this month.

© 2017 Thomson/Reuters. All rights reserved.

 
1Like our page
2Share
StreetTalk
A gauge of U.S. business investment plans fell in November and the prior month's increase was revised sharply lower as the drag on manufacturing from a strong dollar and spending cuts in the energy sector showed little sign of abating.
Manufacturing, economy, business investment, income
680
2015-00-23
Wednesday, 23 Dec 2015 11:00 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved