Industrial Production, Consumer Spending To Rebound U.S. Economy
The U.S. economy is positioned for future growth, forecasts ITR Economics’ August 2016 ITR Advisor report. The economic analysis firm expects improvements during the last half of 2016 and into 2017, pointing to a number of indicators including U.S. Industrial Production and the U.S. Purchasing Managers Index.
ITR Economics expects Industrial Production—bringing together mining, manufacturing and utilities, and a commonly used indicator for the country’s overall industrial economy—to reverse in third quarter and recover through the rest of this year. The Purchasing Managers Index is typically ahead of Industrial Production by nine to 14 months and has been on an upward trend since December 2015, and its rise signals growth in the economy’s manufacturing sector.
From a consumer perspective, ITR also sees strength in the economy. U.S. Private Sector Employment for the 12 months ending in July 2016 was up 2.1 percent from the same period a year ago. A tighter labor market has pushed up wages, which is reflected in 1.7-percent growth in Total Retail Sales from a year ago. Furthermore, Single-Unit Housing Starts were up 1.3 percent in July compared to July 2015.
In its analysis of specific sectors of the economy, ITR notes that U.S. Total Wholesale Trade in the 12 months ending in June was down 3.4 percent, year-over-year, noting a 29.9-percent decrease in the Petroleum and Petroleum Products category. However, a bright spot within the sector is Wholesale Trade of Machinery, Equipment and Supplies, which climbed 2.2 percent in second quarter due to growing capital investments.
U.S. Total Manufacturing Production reports a modest 0.5-percent growth rate for the past quarter. ITR attributes this to a strong U.S. dollar and a 7.9-percent decrease in U.S. Exports. It expects the sector to avoid recession as commodity prices improve later in 2016 and growth accelerates.
Low metal and oil commodity prices have hampered capital investment in the mining sector, contributing to the U.S. Nondefense Capital Goods New Orders (excluding aircraft) sector’s 3.6-percent year-over-year decrease. ITR expects New Orders to recover as industrial demand picks up.
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