Indicators Point Toward Improving Economic, Manufacturing Conditions In 2017
In the September 2016 edition of its ITR Advisor, economic research and consulting firm ITR Economics shares its outlook on what to expect going into 2017, highlighting positive trends in industrial production, retail sales in its macroeconomic review, and other factors.
ITR expects U.S. industrial production to move into the recovery phase of the business cycle in third quarter. It notes the sector’s utilities and mining segments—both of which contracted over the past year—are improving, with utilities in particular up 2.4 percent over the last three months. Their growth offsets a stagnant manufacturing component, suppressed primarily by virtually flat auto sales.
Total retail sales, for the 12 months ending August, are up 1.8 percent from one year ago, and growth is expected to remain slow into the middle of 2017. ITR notes, however, that wages are in the upswing while unemployment and interest rates are low. It expects consumers to grow more confident next year.
ITR also highlights consumer spending’s role in supported the economy over the past year, countering weaknesses in the industrial sector. At $765.8 billion, U.S. Nondefense Capital Goods New Orders for the year ending in July were down 4.1 percent for the same period one year ago. Similarly, the Census Bureau’s New Orders data showed similarly negative trends, although it reported positive changes in Electromedical, Measuring and Control Instruments (up 4.8 percent) and Other Electrical Components New Orders (up 18.5 percent). ITR says, “It is likely that the strong U.S. dollar, uncertainty due to the upcoming election, and faltering U.S. corporate profitability are dampening the New Orders transition to recovery in the near term.”
New Orders should rise in 2017, ITR notes, with indicators suggesting that their decline will taper off this year. A rise in the Purchasing Managers Index and commodity prices also point toward improving conditions next year.
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