The service sector and manufacturing both shined this summer. Here are the five things we learned from U.S. economic data released during the week ending September 8.
Service sector growth accelerated in August. The Services PMI added 1.8 points to 54.5. The Institute for Supply Management index has not been this high since February and has stayed above 50.0—indicative of a growing services sector—for eight consecutive months. Increasing were indices for business activity (57.3), new orders (57.5), employment (54.7), and inventories (57.7). Thirteen of 18 tracked service sector industries expanded in August, led by real estate, accommodation/food services, and art/entertainment/recreation. The press release noted that most survey respondents were “positive about business and economic conditions.”
Factory orders—outside of aircraft—grew in July. New orders for manufactured goods dropped 2.1 percent to a seasonally adjusted $579.4 billion. The Census Bureau data series has totaled $4.026 trillion over the first seven months of 2023, up 0.5 percent over the comparable 2022 months. Transportation goods orders slumped 14.3 percent due to sharp declines for civilian (-43.6 percent) and defense (-10.9 percent) aircraft. Net of transportation goods, factory orders grew 0.8 percent (although orders thus far this year were 1.6 percent below the comparable year-ago pace). Shipments grew for a third straight month, adding 0.5 percent to $577.2 billion. Unfilled orders also grew 0.5 percent (to $1.332 trillion) for its seventh gain in eight months. Inventories inched up 0.1 percent to $852.5 billion.
Trade activity and the trade deficit grew in July. Exports increased 1.6 percent to a seasonally adjusted $251.7 billion and imports grew 1.7 percent to $316.7 billion. The resulting trade deficit of -$65.0 billion represented a 2.0 percent gain from June. The Census Bureau and Bureau of Economic Analysis measure has totaled -$470.3 billion thus far this year, down 21.4 percent from the comparable 2022 months. In July, the goods deficit widened by $2.0 billion to -$90.0 billion and the services surplus expanded by $0.7 billion to +$25.0 billion. Exports of automobiles and industrial supplies rose, along with gains for imported consumer goods (including cell phones and pharmaceuticals), computers, and semiconductors. The U.S. had its largest goods deficits with China, Mexico, the European Union, and Vietnam.
Q2’s productivity gain was nearly a three-year high. Nonfarm business labor productivity jumped 3.5 percent on a seasonally adjusted annualized basis. The Bureau of Labor Statistics measure results from a 1.9 percent gain in output as the hours dropped 1.5 percent. Nonfarm business productivity was 1.3 percent above year-ago levels, with output and hours worked up 2.5 percent and 1.2 percent, respectively. Business productivity rose 3.4 percent for the quarter and 1.4 percent from a year earlier. Manufacturing sector productivity gained 2.9 percent, although it remained 1.3 percent its year-ago pace.
Wholesale sales rose, but inventories narrowed in July. The Census Bureau estimates merchant wholesaler sales increased 0.8 percent to a seasonally adjusted $648.1 billion. Even with the advance, sales were 4.2 percent below year-ago levels. Sales of durables and nondurables increased 0.3 percent and 1.3 percent, respectively. Inventories shrank 0.2 percent (up a paltry 0.5 percent from a year earlier) to $902.3 billion. While nondurable inventories grew 0.1 percent, the same for durables narrowed 0.3 percent. The inventory-to-sales ratio of 1.39 was down two basis points from June but up six basis points from a year earlier. Durable (1.84) and nondurable (0.99) I/S ratios slipped by one basis point from June.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending September 2, 2023, First-Time Claims, seasonally adjusted): 216,000, -13,000 vs. the previous week, +19,000 vs. the same week a year earlier). 4-week moving average: 229,250 (+11.3% vs. the same week a year earlier).
- Vehicle Sales (August 2023, Automobiles & Light Trucks, seasonally adjusted annualized rate): 15.035 million (-4.5% vs. July 2023; +13.6% vs. August 2022).
- Consumer Credit (July 2023, Non-Real Estate Back Consumer Credit Balances, seasonally adjusted): $4.985 trillion (+10.4 billion vs. June 2023; +4.9% vs. July 2022).
- Beige Book
The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.
What We Learned About the U.S. Economy Last Week 